Call Spreads - Option Premium Analysis

With a nice, robust gain yesterday I could not but help to take a look at the SPX option chain to see what was available in the way of call spreads. Premiums were thin and in order to get a decent credit, I would have to move closer to the market than I was comfortable.

Remember. The primary profit engine behind our credit spread strategy is time decay. Our goal is to sell spreads where we think the market is not likely to go. If all goes well, those spreads will erode in value and will be closed out, or expire, allowing us to keep our credit.

If you sell you spreads too close to the action, you're likely to spend some tense moments in front of your computer watching the index. It can be exciting, but this strategy favors the dull passage of time.

So, a call spread was not sold. With the market giving up some of yesterday's gains it is time to return to the porch swing and watch the grass grow, or the paint dry, or whatever... Just so long as our put spread stays safely away from the money.