Credit Spreads For Choppy Markets: How To Profit Without A Big Move

If you have ever picked the right market direction and still lost money on an options trade, the problem may not have been your analysis. It may have been the strategy you used.

Buying a call or put can look simple: choose a direction, pay the premium, and wait for the stock to move. But getting the direction right is only part of the equation. The move must often happen far enough and fast enough to overcome time decay and changes in implied volatility.

That can be a difficult combination in a choppy market, where stocks move back and forth without establishing a lasting trend.

Credit spreads offer another approach.

This post originally appeared at NetPicks.