The Spread Book

30–45 DTE Credit Spread Strategy (Core Framework)

Purpose of This Strategy

This framework is designed for swing trading defined-risk credit spreads on liquid U.S. equities using 30–45 days to expiration (DTE).

The goal is not to predict large directional moves.
The goal is to:

  • Structure trades where probability and time decay are in your favor

  • Control risk precisely

  • Avoid overtrading and emotional management

  • Generate repeatable outcomes over a large sample size

This strategy prioritizes process consistency over short-term results.

Why 30–45 DTE Matters

The 30–45 DTE window offers a balance between competing risks:

  • Enough time for theta decay to work meaningfully

  • Lower gamma risk compared to near-dated options

  • Sufficient time to manage or exit trades without panic

Shorter expirations amplify noise.
Longer expirations slow decay and tie up capital.

Step 1 — Stock Selection (The Most Important Step)

Not every stock is suitable for credit spreads.

Core Stock Requirements

A stock must meet all of the following before it’s considered:

  • High liquidity (tight bid/ask spreads)

  • Active options chain

  • Consistent institutional participation

  • No binary events (earnings, FDA, lawsuits) during the trade window

Examples of suitable underlyings:

  • Large-cap equities

  • Index ETFs

  • Stocks with stable, repeatable price behavior

Step 2 — Determining Put vs Call Credit Spreads

The decision to sell puts or calls is driven by market context, not preference.

Put Credit Spread Bias (Bullish to Neutral)

I favor put credit spreads when:

  • Price is above key moving averages (9 / 20 EMA on daily)

  • The broader market is stable or trending upward

  • Pullbacks are being bought, not aggressively sold

  • Downside volatility appears contained

Interpretation:

I am not betting on upside — I am betting that price will not collapse.

Call Credit Spread Bias (Bearish to Neutral)

I favor call credit spreads when:

  • Price is below declining moving averages

  • Rallies fail near resistance

  • The market shows distribution or risk-off behavior

  • Upside momentum is weak or corrective

Interpretation:

I am not betting on downside — I am betting that price will not break higher.

Step 3 — Using Data to Confirm Context (GEX, DEX, Volatility)

Directional bias is strengthened by contextual data, not indicators alone. For this type of data, I use the data from Quantdata.us to see GEX, DEX, VEX, and IV Rank on the expirations and stock I’m interested in. Any provider that provides these types of data is good.

Gamma Exposure (GEX)

Gamma exposure helps identify where large dealers may stabilize or amplify price movement.

General guidelines:

  • Positive gamma zones tend to suppress volatility

  • Negative gamma zones can allow faster directional movement

  • I avoid selling spreads inside obvious negative gamma pockets

Usage:

  • Helps determine where price is less likely to travel

  • Helps avoid strikes sitting in unstable price regions

Delta Exposure (DEX)

Delta exposure provides insight into directional pressure.

I look for:

  • Areas with heavy dealer positioning

  • Zones where price repeatedly reacts

  • Confirmation that my short strike is positioned away from high delta concentration

DEX does not dictate trades — it refines strike placement.

Volatility Context

Volatility should justify the risk taken.

I prefer:

  • Elevated or expanding implied volatility (IV RANK 25% or more)

  • Premium that compensates for spread width and time in trade

I avoid:

  • Selling spreads in compressed volatility environments (LOW IV)

  • Reaching for premium by moving strikes too close (Highest delta that I would sell is 25)

Step 4 — Strike Selection (Where Probability Is Built)

Strike selection is based on distance and structure, not delta alone.

General Strike Placement Rules

  • Short strike placed beyond recent support or resistance

  • Outside expected move when possible

  • Positioned where price must make a meaningful move to threaten the trade

Key inputs:

  • ATR-based expected movement

  • Price structure

  • Gamma and delta zones

  • Moving averages as reference, not targets

The long strike exists only to define risk.

Step 5 — Entry Criteria

A trade is entered only when:

  • Directional bias is clear

  • Strike placement aligns with structure

  • Risk is predefined and acceptable

  • The trade does not require hope or heroics to succeed

If the setup is not clean, no trade is taken.

Step 6 — Trade Management (Where Discipline Matters)

This strategy is not designed for constant adjustments.

General Management Principles

  • Positions are monitored, not micromanaged

  • No emotional rolling to “fix” trades

  • No adding size to defend a bad position

If the original thesis is invalidated, the trade is reduced or exited.

Step 7 — Profit Taking

Profits are taken before expiration.

Typical profit objectives:

  • 50–70% of max credit for swing trades

  • Earlier exits if risk/reward deteriorates

  • Partial exits if conditions change

I do not attempt to extract the final dollars of premium.

The goal is consistency, not perfection.

Step 8 — When to Manage or Exit Early

Early management or exit occurs when:

  • Price violates the original thesis

  • Volatility expands unexpectedly

  • Correlation risk increases

  • Dealer positioning shifts materially

  • Risk becomes asymmetric

Losses are accepted as part of the process, not avoided at all costs.

Step 9 — Risk Management Rules

Risk is controlled through:

  • Spread width

  • Position sizing

  • Limiting correlated exposure

  • Avoiding overtrading

No single trade is allowed to materially impact the account.

Common Mistakes This Strategy Avoids

  • Selling spreads too close to price for premium

  • Ignoring volatility context

  • Trading every opportunity instead of good opportunities

  • Managing trades emotionally

  • Treating probabilities as certainties

Final Thoughts

This strategy is intentionally boring and repeatable.

It works because:

  • It avoids unnecessary prediction

  • It emphasizes probability over precision

  • It respects risk before reward

Over time, the edge comes from discipline and execution, not complexity. Keep in mind, when you are first trying this strategy out, it might take some time to get used to. If you went from doing intraday options or 0dtes type of plays, it will take a great time to adjust. This strategy requires a lot of patience because 30-45 days is a long time and it gives a lot of chances for the market to move a different direction, which is why we never hold until expiration. I normally wait until 21 days to see if I want to stay in a trade longer or to cut it and release the capital for something else. I normally aim for something closer to 30 days instead of 45 days however if you want to be safer you can always go for longer. You want to aim for credit spreads that have 72% or more on expiring worthless. Anything lower than that is not worth the risk unless you have some information telling you that in the next 20-30 days the stock will continue the trend. You should also sell premium for at least $1.00. Anything lower isn’t really worth it since you are mostly aiming to close the position after 50%-70% and 50% of lets say for example $0.60 is only $30. Waiting a few days for $30 compared to $50 isn’t bad but its not worth the time in my opinion.