Standard Credit Spread#
The “Simple Fade” Play - Bet that a key level holds in a Positive Gamma environment.
Overview#
| Attribute | Value |
|---|---|
| Environment | Positive Gamma (Drift) |
| Market Dynamic | Slow Grind Directional |
| Volatility | High VIX (>15) |
| Primary Goal | Fade the Move - Bet that resistance/support holds |
| Profit Target | 50% of Credit |
| Max Loss | Width of Spread minus Credit |
Use when Positive Gamma is present and you only want to play one side (e.g., “I think the top is in”). Requires confidence that the level will hold.
Structure#
Bearish (Call Credit Spread)#
- Sell OTM Call at the Call Wall
- Buy Further OTM Call (5-10 points higher)
Bullish (Put Credit Spread)#
- Sell OTM Put at the Put Wall
- Buy Further OTM Put (5-10 points lower)
Entry Criteria#
- Positive Gamma environment confirmed
- Clear directional bias (fading a move)
- Sell strike at a key level (Call Wall or Put Wall)
- Confident the level will hold
Exit Rules#
Profit Target#
- Close at 50% of credit received
Stop Loss#
- 2x to 3x Credit Received
Management#
This is a simple, defined-risk trade. No adjustments.
Key Difference vs. Short BWB: Use Credit Spreads when you are confident the level will hold (Positive Gamma). Use the Short BWB when you fear the level might shatter (Negative Gamma/Tail Risk).