A lot of credit spread conversations begin with one question: “What delta should I use?” Delta can be a useful reference, but it is only one part of the decision. It does not tell you whether the spread is in a sensible place on the chart, whether the credit compensates you for the risk, or what you will do if the trade moves against you.
I put this checklist together to make those other questions harder to skip. The goal is not to find a perfect setup or predict every market move. It is to slow down long enough to understand the trade you are considering—and to recognize when the answer is simply to pass.
Credit Spread Pre-Trade Checklist
Thesis: What do I expect the underlying to do, and why does a credit spread fit that view?
Direction: Does the spread match my thesis—a bull put spread for a bullish or neutral view, or a bear call spread for a bearish or neutral view?
Time: Does the expiration give the idea enough time to work, and am I comfortable with the risk that remains during that period?
Short strike location: How far is it from the current price? Where is it relative to the support, resistance, or other levels I am watching?
Delta and probability: What does delta suggest, and what are its limits? Treat it as an estimate—not a guarantee that the spread will expire safely.
Credit versus risk: What credit will I receive compared with the spread width? For a standard one-lot spread, maximum loss before fees is approximately (spread width − credit) × 100.
Maximum loss and size: What is the most I can lose, and is that amount acceptable for this account? A defined-risk spread can still lose more than I am willing to risk.
Liquidity: Are the bid-ask markets and available volume reasonable enough to enter and exit without giving up too much to slippage?
Upcoming events: Is there earnings, an economic report, or another scheduled event that could sharply move the underlying before expiration?
Exit plan: Before I enter, what would make me take a profit, close for a loss, or step aside? What will I do if the short strike is tested?
Final check: If I cannot explain the trade’s thesis, risk, and exit plan in plain language, am I willing to wait for a clearer opportunity?
Keep the checklist in perspective
No checklist removes uncertainty. Support and resistance can fail, option prices can change quickly, and probability estimates can be wrong. The checklist is there to make the trade’s assumptions and risks visible before capital is committed.
Delta belongs in the process, but it cannot replace the thesis, strike location, reward-to-risk comparison, position size, or exit plan. Sometimes the best result of a checklist is deciding not to place the trade.
Save this list and use it as a prompt before your next credit spread. Which item do you find easiest to overlook?
Educational content only; this is not a recommendation to place any trade.