My Credit Spreads Journey: Lessons, Losses And A New Cash Secured Credit Spread Strategy

About a new cash secured credit spread strategy.

I began trading put credit spreads in September 2021. and while the early wins were encouraging, the market had other plans. This post is a reflection on my journey—what worked, what didn’t, and how I’ve evolved my strategy to be more resilient, and cash secured.

Below is a summary of my trades and income across the years:

Year	No of trades	Credit Spreads	Buy Puts	Total Amount
2021	36	$2,283.18	0.00	2,283.18
2022	31	(9,553.84)	3,522.78	(6,031.06)
2023	18	78.08	0.00	78.08
2024	49	2,619.38	6,538.86	9,158.24
		(4,573.20)	10,061.64	5,488.44

Early Wins, Tough Lessons

My initial trades were promising, but when market conditions shifted, the losses quickly outweighed the gains. It felt like taking one step forward, two steps back. While credit spreads offer a high win rate, the wins are often small—and the losses, painfully large. The psychological toll of watching hard-earned premiums evaporate is real.

The Surprise of Early Assignment

In several trades, my SHORT put legs were assigned early. Thankfully, I had the buying power to settle those positions. What surprised me was how much I could sell the LONG put for—sometimes turning a losing trade into a profitable one.

Example 1: SPY

Trade: 28DTE (days to expiry) put credit spread, strikes $557/$552
Premium collected: $85
SHORT put assigned 2 weeks early
LONG put closed for $5,143 profit
Total premium: $85 + $5,143 = $5,228
Outcome: Transferred funds to settle, later sold shares for profit

Example 2: TSLA

Trade: 50DTE put credit spread, strikes $365/$350
Premium collected: $465
SHORT put assigned 1 week early
LONG put closed for $9,579.85 profit
Total premium: $465 + $9,579.85 = $10,044.85
Outcome: Still holding TSLA shares

These experiences taught me that early assignment isn’t always a disaster—it can be an opportunity. Once the panic subsides, there’s potential to profit even when the trade doesn’t go as planned. That led me to ask: Can I turn this into a deliberate strategy?

The Danger of Underestimating Buying Power

Like many new traders, I focused only on the capital required for the spread itself. A $5 spread meant $500 in buying power—so why not open multiple contracts? That mindset nearly cost me dearly.

Example 3: META

Trade: 2 put credit spreads, strikes $125/$120
Premium collected: $774.96
Required capital: $1,000
Outcome: Both legs assigned early
Settlement required: $25,000
Result: Insufficient funds → broker liquidated positions → major loss

Had I been cash secured, I would’ve owned 200 META shares at $125 and earned $3,329.88 in premiums. Imagine holding those shares today…

My Cash Secured Credit Spread Strategy

I resolved to learn from this mistake by developing a cash secured credit spread strategy.

Inspired by the Options with Davis course, I’ve built a more conservative, cash secured approach. If you’re new to credit spreads, check out The Credit Spreads Blueprint or Davis’ YouTube guide first.

Learning takes time. Once you learned it, it is yours. Nobody can take that away from you.

Build a watchlist of stocks and ETFs you want to own

Not stocks you don’t mind owning—stocks you actively want to own. Many traders say they’re okay owning shares, but when assignment happens, they scramble to exit. Be honest with yourself.

I look for companies that are:

Consistently profitable
Cash-rich or debt-free
Undervalued or fairly valued (check with Alpha Spread – Stock Valuation Platform)

Identify buy signals

Davis uses the Stochastic Oscillator and support/resistance zones. I’m still learning technical analysis and attending classes. Once I find a strike range, I cross-check valuation on Alpha Spread.

Scan for Options Between 45–65 DTE

This range helps reduce risk. I choose spreads based on my max risk per trade—no leverage. If all trades go south, I want to survive. I only use cash I have.

Look for ~75% Probability of Profit (POP)

Even if I’m willing to buy the stock, I still aim for high-probability trades. Here is a screenshot showing a NVDA 51DTE credit spread. The POP is 71.36%.

My Credit Spreads Journey: Lessons, Losses and a New Cash Secured Credit Spread Strategy

Target Premiums Around 20% of the Spread

For a $10 spread, aim for $2.00 premium. I’ll accept 15% if needed. This helps maintain a healthy risk/reward ratio. In the NVDA example above, I can collect $2.06 for a $10 spread.

Note: Moomoo charges $3.50 per leg, so factor in $14 round-trip fees in your calculation of profit.

Plan Multiple exit strategies

If price rises → exit with 50% profit
If price stays safe → hold to expiry
If price hits SHORT strike <21DTE → roll for net credit
If SHORT put assigned → close LONG put, settle position
If price crosses both strikes <1DTE → close LONG put, await assignment

This strategy has helped me trade with more confidence and fewer surprises. It’s not foolproof, but it’s grounded in lessons I’ve paid for. I will tweak it when I gain more knowledge.