We Thought Distance Explained Our Put Spread Stops. The Data Says Otherwise

In our article on the best credit spread strategy we wrote that all 14 stops in our paper record had the short strike less than 8% below SPY at entry, and we suggested that distance from the price was what the stops had in common. A reader pointed out something we had not done: measure the distance against what the market expects SPY to move. We did. The result changes the story, so this is a correction.

How to read the 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 the model has no sudden jumps in volatility. 86 of the 89 closed trades are used here (three had no volatility reading for their entry day). Many trades overlap in time, so they are not independent tests. It is a short, early record and it is not a forecast. Full detail is on the performance page.

Two ways to measure distance

The first way is the one we used: how far below the SPY price the short strike sits, in percent. A strike 7% below the price is 7% below the price whatever the expiry.

The second way asks how big that gap is compared with what the market expects. We use the VIX as a simple proxy for expected volatility, and the expected move over the life of the trade is the VIX, as a decimal, times the square root of the time to expiry in years. The distance in expected moves is the log of price over strike divided by that expected move. With VIX at 16, a 7% gap on a 60-day trade is about 1.1 expected moves. The same 7% on a 120-day trade is only about 0.8, because over a longer period the market can move further. The same percentage is not the same distance.

What the record shows

Two things stand out.

• Within the 60-day group, stops and winners were at the same distance. The 14 stops averaged 6.6% below the price and 1.09 expected moves. The winners averaged 7.0% and 1.10. Distance did not separate the trades that failed from those that worked.
• The 120-day trades were closer in expected-move terms (0.94 versus 1.10) and had no stops. If distance in expected moves were what protected a trade, they should have fared worse.

So the statement "all 14 stops had the strike less than 8% below the price" was true but misleading. Those trades were the 60-day trades, which also happen to have the smaller percentage gap. Distance and expiry were tangled together, and we read the effect as distance.

What probably did matter

We cannot prove it with a record this short, but three things stand out:

• Timing. All 14 stops came from trades opened in May (4), June (5) and July (5), and they were closed on only 7 trading days, in June and on 29 July. Positions opened in the same weeks shared the same market episodes.
• Expiry. A 120-day trade has time to wait out a pullback and is less sensitive to a short dip. A 60-day trade has less time and reprices faster.
• Regime. The 120-day trades are opened after SPY has pulled back below a shorter average, which is a different moment from a new high. We cannot separate the effect of expiry from the effect of when the trades were opened.

What we do not know

• The VIX is a proxy: it measures the implied volatility of the S&P 500 index over 30 days, not of each option we sold.
• The prices are modeled, with no sudden jumps in volatility. Real stops would be more frequent, especially on shorter expiries.
• 43 trades in each group, overlapping in time, over about five months. 8 of the 120-day trades are still open and can still lose.

What we are changing

The signal rules do not change because of this. What changes is how we describe the record: we will no longer present the percentage distance as the thing the stops had in common. In the playbook and in our earlier articles, the distance finding is being rewritten as "entangled with expiry and not confirmed in volatility-adjusted terms".

What you can take from it

• When you compare strikes across expiries, do not compare percentages. Compare the distance in expected moves, or use delta, which already takes time and volatility into account.
• Do not rely on one number. Look at distance, expiry and when you are opening the trade.
• Size for the worst case: a gap can skip a stop whatever the distance. The one-page checklist has the steps, and the 1.5x stop loss explains how the stop works.

We publish this correction because a record that hides its own mistakes is not worth reading. If you spot another one, tell us. Every closed trade, stops included, is on the performance page.

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.