A 9-to-1 credit spread, and what it actually asked for

When you are picking a strike for a credit spread, you eventually run into one that sells unusually rich.

Same five-point width. One strike pays 1.85, another pays 4.50. On a defined-risk vertical, max loss is the width of the strikes minus the credit, so the 4.50 spread risks 0.50 to make 4.50. It looks like nine to one.

I took that spread. This is a record of what it actually asked for in return.

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1. The breakeven win rate is one line of arithmetic, done before entry

On a defined-risk credit spread, max profit and max loss are fixed the moment you fill. So is the win rate at which the position breaks even over repetition.

max profit          = credit
max loss            = width − credit
breakeven win rate  = max loss ÷ width

Breakeven win rate — the win rate at which repeating this position leaves you flat. If the actual win rate runs above that, the position adds up. Below it, it grinds down.

On a five-point width:

Credit received	Max profit	Max loss	Breakeven win rate
1.85	1.85	3.15	63%
2.20	2.20	2.80	56%
2.75	2.75	2.25	45%
3.45	3.45	1.55	31%
4.50	4.50	0.50	10%

The richer the credit, the lower the breakeven win rate. The bottom row breaks even winning one time in ten.

On the numbers, it is not close. So I took the bottom row.

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2. There is a column missing from that table

The breakeven win rate tells you what percentage you need. It says nothing about what percentage you actually have.

Those are two different numbers. The missing column is where the breakeven price sits right now, and that is fixed at entry too.

breakeven price = short strike + credit        (call credit spread)

Here are the five spreads I put on that day, measured that way.

Credit received	Breakeven win rate	Short strike	Breakeven price (vs. the index at fill)	What has to happen
1.85	63%	7,725	11.7 pts above	It just has to stay below
2.20	56%	7,725	7.1 pts above	It just has to stay below
2.75	45%	7,700	1.3 pts below	It has to fall 1.3 pts
3.45	31%	7,700	10.0 pts below	It has to fall 10.0 pts
4.50	10%	7,700	24.5 pts below	It has to fall 24.5 pts

The two columns move in exact opposition.

The top row needs the highest win rate — 63% — and its breakeven sits 11.7 points above the index. The bottom row needs the lowest — 10% — and its breakeven sits 24.5 points below.

Every point you shave off the breakeven win rate, you pay for with a bigger move the market has to make. That is not a coincidence. There is a reason for it.

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3. Below the index, what you collect is not premium

With the index at 7,729, selling the 7,700 call and buying the 7,705 call puts both legs in the money.

Left alone to expiration with the index where it is, that spread settles at 5.00 — the full width. Its intrinsic value is already 5.00.

Taking 4.50 for it means selling something worth 5.00 for 4.50.

📌 There is almost no time value in that 4.50. The short strike is already 29 points in the money, which is why the spread is worth its full width — and 4.50 is that width less half a point. To win, that intrinsic value has to shrink below 4.50 — meaning the index has to close under 7,704.50, a fall of 24.5 points.

One thing to remember.

A call sold above the index bets on direction. A call sold below the index bets on distance.

	Call sold above the index	Call sold below the index
What has to happen	It just has to stay below breakeven	It has to fall to breakeven
If nothing happens at all	🟢 You win	🔴 You lose
Credit received	Small	Large
What you are betting on	Direction	Distance

"What happens if nothing happens" is the single line that separates the two.

⚠️ In-the-money short legs also carry early-assignment risk. European-style index options do not: they cannot be exercised before expiration. American-style options — single names, and a few index products — can be assigned early. Everything above assumes European-style, cash-settled index options.

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4. 2026-08-19 observation — two strikes, same day

📌 Dated observation. A single day. Read it as a record, not a rule.

That day I put on call credit spreads at two different strikes. The directional read behind both was identical — it is not going higher.

Open 7,716.74   High 7,743.93   Low 7,700.07   Close 7,708.03

① The strike above the index — 7,725 / 7,730

Intraday the index ran to 7,743.93 — nineteen points through the short strike. It still closed at 7,708, and the spread expired for the full credit.

② The strike below the index — 7,700 / 7,705

On the last entry I sold the 7,700 call with the index at 7,729. At a credit of 4.50 that put breakeven at 7,704.50 — 24.5 points below the index.

The actual decline into the close was 21 points, to 7,708.03. Three and a half points short of breakeven.

The direction was right. The distance was not. Same day, same direction, same strategy, same size. The only variable was where it was placed.

The window was seven minutes wide

② came close in the afternoon. The index printed 7,701.

12:50   low 7,702.63
12:55   low 7,701.25   ← the best moment
12:58   low 7,705.70   ← window closed

It was open for roughly seven minutes. The 12:58 low of 7,705.70 sits just above breakeven at 7,704.50 — the window shut the moment price crossed back over that line.

① never had a window at all — there was nothing to watch. It just had to expire.

Sold below the index, the winning window opens late and shuts fast. That pressure is not a problem of exit skill. It is decided when you pick the strike.

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5. So I added a fourth line

I write down three numbers before every entry. There is now a fourth.

① max profit
② max loss
③ breakeven win rate
④ how far the breakeven price sits from the index right now   ← new

On ③ alone, the 4.50 spread looks like the best of the five. Put ③ and ④ next to each other and it does not.

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6. What I still do not know

• When selling below the index is justified. If the case for "it will move that far" is strong enough, the position can stand on its own. I do not yet have a way to measure that case, and I am not going to pretend otherwise.
• The above is one day. The same shape shows up three separate days in my records, which is too few to count as a sample. I am not settling this before thirty trading days.

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※ This is a record of my own trading and the reasoning behind it, not a recommendation on any security, strike, or trade. Every investment decision and its outcome belongs to the person who makes it.