A 90% win rate sounds like a trader’s dream — winning 9 out of every 10 trades consistently. In the world of options trading, this is possible, especially when using out-of-the-money (OTM) vertical credit spreads.
But the story isn’t as simple as just placing trades and watching the profits roll in. There are important steps, risks, and decisions involved that can make or break your success.
In this article, I’ll walk you through everything you need to understand this strategy. I’ve curated three of our videos that explain:
- How to build and enter a credit spread trade properly
- How to pick the best entry points to maximize your chances of success
- The real truth behind that 90% win rate and how to manage the risks
Video 1: Step-by-Step Process of How to Sell a Credit Spread
Before chasing a high win rate, you need to understand exactly how to sell a credit spread. This isn’t as simple as buying stock or selling a covered call — it involves two options contracts working together.
What is a credit spread?
A credit spread involves selling one option and simultaneously buying another option at a different strike price to limit your risk. The “credit” part means you collect money upfront from the difference in premiums.
Most traders focus on put credit spreads on the put side of options, which means:
- You sell a put option at a higher strike price (closer to the current stock price) — this is your short leg.
- You buy a put option at a lower strike price — this is your protective leg.
For example, if a stock is trading at $85, you might sell a put at $80 and buy a put at $75. You receive a net credit from selling the $80 put minus the cost of buying the $75 put. Your risk is limited to the difference between the strike prices minus the credit received.
How to enter the trade (with examples):
The video walks through specific examples using Starbucks (SBUX) and Meta (META) stocks. It shows you how to:
- Find the right strike prices on your trading platform
- Sell the higher strike put
- Buy the lower strike put
- Enter the spread as a single order (most platforms let you do this simultaneously)
This process is essential because placing the spread correctly ensures you limit your risk while collecting that credit upfront.
Why it matters:
Setting up the trade properly is the foundation of the strategy. If you just sell a naked put without buying protection, your risk is unlimited. Credit spreads limit losses while aiming for consistent profits.
Read Full Article Here: Step by Step Process of How to Sell a Credit Spread
Video 2: Two Ways to Pick Entry Points When Selling Vertical Spreads
Once you know how to set up the trade, the next question is: When should you enter it? Timing is everything in options trading.
This video covers two straightforward but powerful methods for finding good entry points:
1. Sell Into Strength (Against the Grain)
Think of price like a rubber band stretched tight. When the stock price falls sharply, it often bounces back (mean reversion). Selling put credit spreads after a sharp drop means you’re selling “into strength” — betting that price will recover, or at least not fall further.
- This approach lets you sell spreads further away from the current price, giving you more room to profit.
- You’re going against the immediate trend but playing the short-term bounce.
2. Sell With the Trend
This is more about following the general market direction. If the stock price is trending upward, you sell put spreads on dips during that uptrend. If the trend is downward, you might sell call credit spreads on rallies.
- You can use tools like the 33-day exponential moving average (EMA) to identify the trend.
- Selling with the trend reduces risk because you’re betting with the flow of price, not against it.
Why Both Matter
Most traders focus only on trends or only on mean reversion. But understanding both helps you pick better entry points and avoid getting caught on the wrong side of price moves.
Read Full Article Here: Two 2 Ways to Pick Entry Points When Selling Vertical Spreads
Video 3: How to Get a 90% Win Rate Selling OTM Vertical Credit Spreads
Here’s where things get interesting — the real deal on the famous “90% win rate” strategy.
Is a 90% win rate possible?
Yes. By selling vertical credit spreads far out-of-the-money, you can set up trades with very high probabilities of expiring worthless — meaning you keep the premium and win the trade.
For example, selling a put spread on Caterpillar stock 25 days before expiration with a 95% chance of expiring OTM is doable. But there’s a tradeoff.
The catch: Risk vs Reward
- These high-probability trades pay a small credit upfront — maybe $25 on a $475 risk.
- If the trade loses, it can wipe out many winning trades.
- This means your risk management needs to be excellent.
Tail-End Risk
The biggest challenge with the 90% win rate strategy is tail-end risk — rare but large losses that happen when the stock moves sharply against your position.
- One big loss can undo months or years of small profits.
- Many traders underestimate or ignore this risk, which leads to big drawdowns.
How to manage this risk
- Diversify your trades: Instead of placing all credit spreads at the same strike price, spread your trades across different strike prices.
- Peel off profits: Take profits as they come instead of holding until expiration.
- Consider slightly lower win rates: Moving closer to at-the-money spreads might reduce win rate but improves the risk-to-reward ratio, making your trading more sustainable.
Read Full Article Here: How to Get a 90% Win Rate Selling OTM Vertical Credit Spreads
The Real Secret Behind a 90% Win Rate in Options
The 90% win rate strategy is not a magic formula — it’s a balance of probability, risk management, and smart entry timing.
- Know how to properly construct credit spreads to limit losses.
- Use price behavior and trend analysis to pick your entry points.
- Never ignore risk — always manage tail-end risk by diversifying and adjusting strike prices.
- Understand that sometimes a lower win rate with better risk-reward is better for your account in the long run.
By combining these lessons and putting in the work, you can build a consistent options trading approach that aims for high win rates without risking everything on one or two bad trades.
