All,
I am currently investigating what's the standard or general guidance in entry point/premium collection point for credit spreads. Let's say for the hypothetical scenario, 75/80 put credit spread @ $2.5 for the simplicity. Of course, there are many factors involved and consider for such an entry but I wanted to find out if there is one just like when writing a covered call people are looking for a delta around .2 to 0.3; As you can see above example for 75/80 put credit spread, the breakeven is for 77.5; If the stock stays above 77.5 then you make money at the expiration. If the stock stay below 77.5 then you lose the money. My question to professional option traders, when initiating the credit spread, where do you typically place your entry? Do you start from the losing side (<75), breakeven point (77.5) or winning side (>80)? Another way of looking at it is starting from a max loss 75 or breakeven 77.5 or max profit 80. Of course it all depends on how much premium you are willing to risk to gain but I wanted to get some general ideas or tips on what/how people are deploying. For me, the risk/reward ratio has to be min 1 to 1 or at least close to 1 to 1 because it wouldn't make sense for me risk more to win little. However, everyone has a different strategy. Again, I am looking for a general or standard guidance.