The 50% Take-Profit Rule for Put Spreads

The 50% take-profit rule is simple: when a credit spread has lost half of its value, you buy it back and keep the difference. It is popular with premium sellers because it shortens the time a trade is exposed. It also has a price. This article shows both sides with real logged numbers.

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.

How the rule works

When you sell a bull put spread you receive a credit. If you later buy the same spread back for half of that credit, you keep the other half. Closing early stops the clock: you stop carrying the risk of a sharp drop in the days or weeks that remain.

A real example from our log. On 4 August 2026, with SPY at about 762, the signal sold the 710 put and bought the 700 put expiring 9 October, for a credit of $0.79 per share. With 4 contracts that is $316. The take-profit target was a spread price of $0.395. On 3 September the modeled spread price reached $0.366, the trade closed, and the paper result was +$169.60.

• Credit received: $0.79 per share, $316 for 4 contracts.
• Maximum loss if held to expiry and SPY fell below 700: (10 - 0.79) x 100 x 4 = $3,684.
• Profit target: buy back at $0.395. Result: about half the credit.

What it did to holding time

In our paper record, winners that hit the 50% target were held a median of 23 days (shortest 6, longest 61). Losing trades that hit the stop were held a median of 15 days. The take profit does free capital sooner than waiting for expiry, but it is not instant: half the winners needed three weeks or more.

The cost: you give up the other half

Closing at 50% means the best possible outcome of every winning trade is capped at half the credit. That only pays if it also cuts the losses. FIREDesk pairs the rule with a stop at 1.5 times the credit, so the loss on a stopped trade is half the credit. The payoff is roughly one to one on the credit, and the result then depends on how often trades win, which is the figure to watch, along with the profit factor (7.0 in this record, a figure that comes from modeled prices: see the note above).

Look at the stop example. On 4 September 2026, SPY near 772, the signal sold the 725 put and bought the 715 put expiring 6 November for $0.72 ($288 for 4 contracts). The target was $0.36 and the stop $1.08. On 15 September the modeled spread price reached $1.139 and the trade stopped out for -$144. Held to expiry in the worst case the loss would have been (10 - 0.72) x 100 x 4 = $3,712, which is why a stop exists at all, and why it is also a cost: some stopped trades would have recovered.

When the rule helps and when it does not

• Helps when the spread decays quickly and the market stays calm: you bank the gain and can redeploy capital.
• Costs you when the market keeps rising and the spread would have expired worthless: you gave up the second half of the credit.
• Does not remove gap risk: a fast move can take the spread through your stop price in one step.

For the theory behind why premium decays and what that means for timing, see theta decay explained, and for the stop side of the rule read the 1.5x stop loss. The full rule set is in the complete SPY bull put spread strategy guide.

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.