What Is the Best Credit Spread Strategy? What Our Paper Record Shows, Stops Included

Search for the best credit spread strategy and you mostly get a list of structures: bull put spread, bear call spread, iron condor. That ranks shapes. In practice what decides whether a credit spread works is more ordinary: how far the short strike is from the price, how long until expiry, and what you do when the trade moves against you. This article looks at those three using our own paper-trading record, stops included.

How to read the FIREDesk numbers in this article. They come from our paper-trading record (14 May to 9 Oct 2026): no real capital was used, option prices are estimated by a model rather than taken from real fills, and 13 of the 102 logged signals use credits calibrated from historical data. The model has no sudden jumps in volatility, so real fills and real stops would be less favourable. On 12 October 2026 we also fixed a calculation error that had recorded stop-losses the market prices did not justify; the figures here are the corrected ones. It is a short, early record and it is not a forecast. Full detail is on the performance page.

There is no best structure, only trade-offs

A credit spread means selling one option and buying another further out of the money, so you receive a credit and your maximum loss is fixed: the width of the spread minus the credit. A bull put spread profits if the price stays above the short put. A bear call spread is the mirror image. An iron condor combines both. Each one trades a small, probable gain against a larger, less probable loss, and none is better in every market.

FIREDesk uses one structure: a bull put spread on SPY, $10 wide, only when SPY is above its 200-day average. The basic mechanics are in the bull put spread explained and the full rules in the complete strategy guide. The question here is narrower: within that one structure, what made some trades fail?

What 102 signals show

Our rules choose the expiry from the trend: about 60 days when SPY is above its 7-, 30- and 200-day averages, about 120 days when it is above the 200-day but below a shorter one. The two groups behave very differently in the log:

• About 60 days: 53 signals, 43 closed: 29 reached the take profit and 14 hit the stop (a third of the closed trades); 10 are still open.
• About 120 days: 49 signals, 41 closed, all 41 reached the take profit; 8 are still open and any of them can still lose.

It is tempting to stop there and say that longer expiries are better. The next section shows why that would be too quick.

The stops had one thing in common: distance

All 14 stops came from trades whose short strike was less than 8% below the SPY price at entry (between 5.9% and 7.4%). Of the 84 closed trades, 50 had a strike closer than 8%, and 14 of those (28%) hit the stop. The other 34 closed trades had a strike at least 8% below the price, and none of them hit the stop.

Expiry matters because of how the strike is chosen. FIREDesk picks the short strike at about 0.10 delta. At a fixed delta, a longer expiry puts the strike further away: in the log the 60-day trades sat on average 6.8% below the price and the 120-day trades 8.8% below. So expiry and distance are tangled together. See delta and strike selection for why 0.10 delta is not the same as a 90% chance of winning the trade.

A stop does not need the price to reach the strike. It triggers when the spread costs 1.5 times the credit received. On 29 July 2026 SPY closed about 4% above the short strikes of five positions, and all five were stopped on the same day. The price was never close to the strikes, but the spreads were close enough to be repriced past the stop.

Stops come in clusters

Because a signal is logged every market day, positions opened in the same weeks share the same market move. The 14 stops happened on only 7 trading days: seven of them were closed between 8 and 12 June, five on 29 July and two in late June. The longest run of consecutive signals that did not reach the take profit was 7, from 26 May to 3 June.

This matters for sizing. 84 closed trades are not 84 independent tests: they behave more like a handful of market episodes. When you size a position, add up the maximum loss of all the spreads you could have open at the same time, not just one. The one-page checklist has the steps. For how the stop itself works, read the 1.5x stop loss.

What happens if you only change the expiry (a model replay)

To separate expiry from distance we replayed the 50 BULLISH entry dates of the log with the same strikes and a 120-day expiry instead of 60, using the same pricing model and the same rules. The 60-day version produced 14 stops; the 120-day version produced 4, with 18 positions still open because the longer trades take longer to resolve. When the short strike was placed at least 9% below the price on those dates, the replay produced no stops at either expiry.

That points in one direction: distance from the price is doing most of the work, and a longer expiry helps mainly because it keeps the same delta further away. Treat it as a hypothesis. The replay uses a model without volatility spikes, one five-month period, and trades that overlap.

A smaller, real sample: the founder's own trades

Alongside the paper record, FIREDesk's founder trades the same kind of spread with real money, one contract at a time. Eight trades have closed so far: five reached the take profit and three were stopped, for a total of +$190 on a $4,000 account. It is a tiny sample and says little by itself, but the pattern matches the paper record. All three real stops were on trades opened with 53 to 74 days to expiry and a short strike 6.0% to 6.8% below the price. The two longer trades that have closed (113 and 114 days to expiry) had strikes 10.9% and 13.2% below the price, and both reached the take profit.

So what is the best credit spread strategy?

If you want an honest answer from this data, it is not a structure. It is four habits:

• Look at the distance, not only the delta. In our record no closed trade was stopped when the short strike was at least 8% below the price at entry.
• Know what a longer expiry buys you. At the same delta it puts the strike further away and brings a larger credit (about $1.08 per share against $0.82 in our log). It also ties up your capital for longer.
• Size for clusters. Count the maximum loss of every position that could be open at once.
• Decide the exits before you enter. A take profit at 50% of the credit and a stop at 1.5 times the credit make the payoff roughly one to one on the credit, so what you control is how often you are stopped.

We have not changed the FIREDesk rules because of this. It is a pattern in a short paper record that we want to test on more data, not a proven edge, and the trades that are still open can still change the picture. To see every signal we have logged, stops included, open the performance page. If you want the signals delivered, there is a 15-day free trial, then $19.99 a month, cancel anytime.

Educational content, not financial advice. Options trading involves significant risk of loss, including the loss of the whole amount at risk on a trade. Past and simulated results do not guarantee future performance.