Managing Credit Spread Risk

In this video I discuss a common concern when trading credit spreads. You can win a high number of trades and then loss it all back on one bad trade. If you manage risk but having exit rules you can eliminate a lot of concern. I teach how I minimize risk.
Click on the links below to view my “3 Principle Trading Method.” This strategy works for all markets: stocks, Options, ETFs, and Forex. I am a professional with over 35 years of trading experience. I have consolidated and simplified all my trading knowledge into this very simple yet powerful strategy.
Part One: Tools - Regression Channel: • Trading Strategy for S...
Part Two: Tools - Measured Moves and Fib. Extensions: • 3 Principle Trading Pa...
Part Three: Actual RUT Trades: • 3 Principle Trading ...
Part Four: Chart Setup: • 3 Principle Trading ...
Part Five: Vertical Credit Spreads: • 3 Principle Trading ...
Part Six: Actual SPX Weekly Trade: • 3 Principle Trading Pa...
Part Seven: Proper Trade Size: • 3 Principle Trading Pa...
Part Eight: Finding/Entering and Exiting a Trade: • 3 Principle Trading Pa...
Part Nine: Actual Forex Trade: • 3 Principle Trading Pa...
Part Ten: 2019 and Expected Returns: • 3 Principle Trading Pa...
Part Eleven: Fact Based Strategy: • 3 Principle Trading Pa...
Part Twelve: Speeding Up Your Learning: • 3 Principle Trading Pa...
Welcome to my channel! My mission is to provide traders like you with the best option trading and investment education available today. For more, visit our website at www.optionsinfinity.com.

[@enricosaccheggiani3192]

A great video, very interesting.
Excuse me what does it mean 6% margin ?
I understood it was a 850 $ risk trade , 6% of 850 is 51 .
Thanks a lot for this interesting video

[@dalebrethauer7796]

6% of margin. Each contract requires $1,000 margin.

[@EvanEvansE3]

Mmm ok, so 6% of the typical margin requirement for the distance between the strikes. Ok, because at TDA they only require you to put up the MAX LOSS amount as "margin". So, thank you for the clarification.

[@wolframluchner5316]

Hi Dale, I wonder if you take IV Rank into consideration when entering a trade. From my understanding an underlying stock with a high volatility yields a much higher premium than one with low underlying volatility. Also selling a high IV spread reduced the risk of volatility increase induced loss.
Please share your thoughts! Thank you!

[@dalebrethauer7796]

Yes, when I calculate the selling strike price I take Volatility into consideration.

[@AtmanGoldenAge]

Hi Dale. Isn't your profile that of a bull put? Do you exit too early in the sense that if market is very volatile it could get back to a profitable trade? Or you exit no matter what and possibly reopen a better position a bit later? Thx and Namaste

[@dalebrethauer7796]

Yes, you have to manage the trade with more info than the 6% guide, ie, support/resistence, etc.

[@IgorMatijevic]

Hi Dale, great video. I don't understand 6% of margin rule. Can you explain it with an example? Do you get out when price is 6% away from your entry, or only 6% away from your long option. or when your loss is at 6% of your max loss?

[@dalebrethauer7796]

4 decades of experience. 6% of margin or $60/contract.

[@MichelHabib]

I have the same question, what do you measure 6% margin against? say the margin is $1000, 6% is $60, so what do you compare that $60 to?

[@dhavidcooper116]

Brilliant. And your service is great. Thanks.

[@dalebrethauer7796]

Thanks

[@mrbee3377]

@dhavidcooper116.. how long have you been a member?

[@enki5420]

difficult to understand this risk mangement method.

[@spetts75]

Hi Dale great strategy. The only question I have relates to using a stop of 6% of margin. It seems to be a very tight stop which can be triggered fairly easily with a volatility spike or a modest move against us. Have you been getting a 75% win rate even with such a tight stop?
Thanks Dale.

[@ElleCarritahKucherro7]

He states that he does not HIDE trades, so I guess we can check the ledger, he shares.

[@dalebrethauer7796]

I'd love you to.

[@dalebrethauer7796]

Sorry. Though this reply went thru. I never use hard stop losses. 6% "Uncle Point" only give me a visual warning to possible exit.

[@spetts75]

@@dalebrethauer7796 thanks Dale

[@hunt1110011]

is that return graphs compounded returns or non compounded?

[@dalebrethauer7796]

non Compounded

[@movimientofire]

Is it possible to place a stop loss on a credit spread based on the stock price?

[@dalebrethauer7796]

Don't do it.

[@Chantcg]

Hey dale, I emailed you and hope to hear from you soon!

[@dalebrethauer7796]

Got it!