Back Issues Archive Traders' Glossary Novice Traders' Notebook Products Store. The options trader has available many different strategies, virtually to suit every need and intent. Here's how to use the credit spread strategy. M ost of the money made in options trading is made by those who write options rather than by those who buy them.
Options lose all of their time premium by expiration, which is referred to as time decay.
Option writers take advantage of this by selling option premium and waiting for time decay to work in their favor. The downside is that writing naked options entails assuming unlimited risk, a risk that most traders simply cannot afford to take. As a result, many option traders never consider writing options. However, there is a strategy that allows even small traders to write options to take advantage of time decay without exposing themselves to unlimited risk. This strategy is referred to as selling a vertical credit spread.