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Some rule of thumbs for establishing credit spreads (from TastyTrade)
– short delta 30 strikes
– seek to collect 1/3 of the width of the strikes in premium sold.
– based on a short 30 delta, long strike should be optimally placed between 10 and 20 delta, at which would grant you 1/3 of the width of the strike and maximize your profit/loss
– if short strike delta is at another level, your long strike would be optimally placed between 10 to 20 delta less than your short strike.
Options Series – #1 Credit Spreads
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