You may think of our trading strategy setups for entering or exiting trades. But they may be used for making option spreads adjustments to the individual legs, which can then increase overall profits, when compared to holding the spread intact until expiration.
Short options trading for credits are a big part of our trading strategies. However, it is important to use resistance and support rejects for entry timing, so that risk can be reduced and the credits can be increased or the prices of a spread can be improved.
When you leg into or out of an option spread, you do your trade 1 strike at at time instead of as a spread. Timing this ‘properly’ can give a number of trading profit benefits – including making more money on the spread than its maximum at expiration, and doing credit spreads that can’t lose money.
This video discusses legging into and out of option spreads, and reviews a timing problem with a spread legged exit. A 4.00 spread price hit the trader’s trailing price of 3.00 on a gap [and I am all for that decision], but instead of exiting the spread at one time, they tried to leg out and only ended up with 1.80.
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