How to Trade Credit Spreads for Monthly Income
Generate consistent returns while keeping risk in check.
If you’re retired (or planning to be soon), you probably don’t want to gamble on the next hot stock. You want steady, low-stress income—without putting your nest egg at risk.
That’s exactly what credit spreads are built for.
They’re one of the best options strategies for retirees because they let you define your risk and your reward from the start. And when used correctly, they can deliver reliable monthly income—even if the market just sits still.
What Is a Credit Spread?
A credit spread is an options strategy that involves selling one option and buying another on the same stock, with the same expiration—but different strike prices.
You collect a net credit (hence the name), and your profit comes from that upfront payment.
There are two common types:
Bull Put Spread (if you think a stock will stay above a certain level)
Bear Call Spread (if you think a stock will stay below a certain level)
Both are great for conservative traders because they limit your maximum loss and give you defined income potential.
Example: Bull Put Spread on Coca-Cola (KO)
Let’s say KO is trading at $62, and you believe it will stay above $60 for the next month.
Here’s the trade:
Sell the $60 put for $1.00
Buy the $58 put for $0.50
Your net credit = $0.50 per share, or $50 per contract
What Can Happen?
Scenario A: KO stays above $60
Both options expire worthless
You keep the entire $50—pure income
Scenario B: KO drops below $60
You may be assigned the $60 put
Your max loss is capped at the $2 spread minus the $0.50 credit = $150 total
Either way, you knew the risk before placing the trade.
Why Retirees Like Credit Spreads
Defined risk, defined reward—no surprises
Works best in sideways or low-volatility markets
Can be adjusted, closed early, or repeated monthly
Uses less capital than buying or selling naked options
This strategy is for folks who want to earn quietly and sleep well.
Quick Tip:
Start with high-probability trades. Aim to sell spreads that are far out-of-the-money, where the stock has a good chance of staying away from your strike price.
In Summary:
Credit spreads are conservative, income-generating trades
They’re perfect for retirees who want monthly cash flow with limited downside
You always know exactly how much you can make and how much you can lose
Want to Learn to Trade Credit Spreads with Confidence?
At OptionsAction.com, we break down credit spreads into simple, step-by-step plans—no jargon, no confusion. Just practical, repeatable trades built for retirement income.
