Best Stocks for Weekly Credit Spreads

Best Stocks for Weekly Credit Spreads

A credit spread is where an investor sells or writes a high premium option and, at the same time, buys lower premium options. Using the options spread strategy is when traders buy and sell options on the same asset.

When a trader receives a premium from the written option, and that premium is greater than the premium paid for the long option, this results in a premium credited in the investor’s account when the position is opened.

A net premium is the maximum profit creditors receive when using a spread strategy.

A bearish trader expects stock prices to decrease and buys call options (long call) at a specific strike price and sells (short call) the same number of call options within the same class and expiration at a lower strike price.

A bullish trader expects prices to increase and proceed similarly as a bearish trader except at the higher strike price.

What are the best stocks for weekly credit spreads?

When considering the best stocks for credit spreads, you want to look at stocks with the best potential moves. Usually, they are large-cap companies with high open interest of over 1,000, lots of volume within the day, and a tight bid/ask spread. Keep an eye out for stocks that offer weekly traded contracts, as these are usually highly liquid.

An example of a large-cap stock would be Apple, Facebook, Netflix, Google, etc. Trading using Credit Spreads or options are a great way to trade in the stock market.

They allow you the right to buy or sell a stock at a specified price. One options contract controls 100 shares of stock.

Finding the Best Stocks for Credit Spreads

Traders are often looking for stocks that will move, even with day trading options or swing trading techniques. The vast amount of stocks, options, and techniques can be overwhelming.

Most people have their go-to stocks, but you have to research primarily if your stocks go stale consistently. You can find a subscription service that sends you updates on what you add to your watchlist.

Trading platforms have scanners that you can set up to look for stocks that fit whatever trading style you prefer. These can keep you informed and make you aware of critical plays you could be making when looking for the best stock credit spreads.

Traders also scan price charts and use technical analysis to find oversold stocks as candidates for bullish put spreads. Writing credit spreads with higher volatility can potentially increase profits. The greater the risk, the greater the rewards but losses and gains are limited.

The best stocks for credit spreads are all a personal choice, and the strategy you are going for with the ultimate goal is to make money in the market.

Credit spreads can be one of the most lucrative strategies if done right, and it’s one of the most reliable trading strategies. Make sure you start with basic trades and do your research before you begin to avoid money blunders.

Did you know?

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