What % of my cash should I use on a single day when opening credit spreads?

The first thing I would recommend is to visit the Monthly Cash Thru Options FAQ Page at http://FAQ.htm and read the entry (3rd from the bottom) entitled “what % of my cash should I allocated in a single day?”. This will answer most of this question.

To further elaborate, sometimes we’ll send out an alert that says something like the following:

“Today is a good day to fill the RUT July 550/560 bear call spread per the recommendation in Sunday’s advisory, and you might want to consider opening 50% or more of your allowed top bear call spreads (to complete the iron condor – since most of you already have opened your bottom bull put spreads) today since expiration week is nearing rapidly”.

I will send out this type of email typically when we started off the cycle by first opening our bottom bull put spreads that let’s say took 2.5 weeks to “collect” where we were using 20% of our cash on each day the recommended spreads were filling. But since it took 2.5 weeks to collect the bottom spreads we now only have a week left or so to open the top spreads, so we’ll have to accelerate our efforts to open the top spreads; that is as long as our analysis tells us that it’s safe to do so.

For me personally, I usually use 20% of my cash on each day the recommended spreads are filling. Periodically I will “back up the truck” and load up on a single spread in one or two days, but this is rare and I’ll only do this when our analysis tells us that there is a very high probability that this particular spread will expire OTM (out-of-the-money) and worthless. (which is 100% profitable for us)

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