Why 2550% Profit Targets Make Sense (Premium Selling)

Date: 2026-09-10 12:15:20

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Let’s look at a winning premium-selling trade.
Example: short put spread. You collect $2 credit ($200 per contract).

Max profit = $200.
Trade works. The spread loses value. Now you can close it for $1.

That means you’ve captured about 50% of the original credit.
So the question becomes: do you take the gain… or keep holding for the rest?
At some point, the trade has already done its job. If you’ve captured 50% of the credit, you may have taken a meaningful part of the available profit — but the risk is still there:
the position can reverse
the market can move
volatility can change
time is still involved
So staying longer can mean risking a lot… just to make a little more.

That’s the diminishing returns concept.
That’s why 25–50% profit targets can make sense for premium-selling strategies — not because they’re magic numbers, but because they help reduce exposure after the trade has already done part of its job.

#optionstrading #riskmanagement #tradingplan #creditspreads #optionseducation

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This video is for educational purposes only and is not a recommendation for buying/selling any security. Options trading is risky, so please read our full risk disclosure here: https://optionalpha.com/legal/risk-disclosure-agreement