LACK OF UNDERSTANDING ON CREDIT SPREAD

Many investors look for spectacular gains while selecting an investment strategy. A common practice is to select whatever investment, stock, or mutual fund has recently been reported in a magazine or newspaper as being one of the top performers over the past year.

In order to fully appreciate the benefits of credit spread writing, traders need to understand the benefits of compound interest and risk management. We constantly hear various websites, emails, and even Investment gurus claiming high % returns, typically 50% or more. When compared to 7% - 12% a month, credit spread ROI look pretty unattractive.

High returns are results of risky and aggressive trades which explains why many investment gurus and books would advice that you keep each position to no more than 5% of your entire portfolio. No matter how good a technical trader you are, no one is able to predict the market. All indicators serve only as guidelines.

Credit spread writing is a lot more predictable and provides more room for error. If you expect the market to be bullish but it turned against you, you may still come out profitable. By establish a non directional strategy like Short Iron Condor, you make money no matter where the market. If the market goes up, you make money. If the market goes down, you make money. And if the market goes sideways, you make money with the passage of time. Bull, bear, or sideways, we collect our monthly profit on every 3rd Saturday of the month. Compound our principal and profit for the following month, we make even more money. Let compound interestand time take their natural course, you will be suprised on how big your account may look in 2 to 3 years time.

WHY ISN'T EVERYONE WRITING CREDIT SPREAD?

No Knowledge of Credit Spreads

Options are perceived to be extremely high risk

Lack of understanding of credit spreads

Limited Profit Potential

Writing Credit Spread is Capital Intensive