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Will we see a continuation of today’s BIG move or a retreat?, and are we still trading volatility? We’ll cover that, why the market is priced to perfection right now and more [tap to join us for Closing Playbook]!
Most traders think credit spreads are about collecting premium and hoping things don’t move against you. That’s the standard approach…
And it’s exactly why most credit spreads fail when volatility hits.
Over the past several weeks, I have shifted more toward trading volatility itself instead of trying to be hyper-directional. The market has been rewarding traders who understand how to structure positions that benefit from movement and uncertainty rather than simple price prediction.
The duckbill spread is one of the clearest ways to express that shift.
I recently put one on in the S&P 500 (SPY) with two days to expiration, and the risk profile is something most traders don’t even know is possible.
Here’s what makes this trade different: I structured it from $651-$652 on the put side up to $669-$672 on the call side. The key was getting in for a $1 credit after working the order through several strike adjustments.
That credit changes everything about the risk profile.
Zero Downside Risk Is Not Marketing — It’s Math
When you enter this structure for a credit, something remarkable happens to your downside risk: It disappears completely.
If SPY gaps down below $651, I don’t lose money — I still make the $1 credit I collected. In a market where gap-down risk has been crushing traders, this spread actually profits from severe downside moves.
And if the market stays flat or moves just a little — which has been the pattern unless something unusually positive hits — the position still makes at least a small profit.
That’s not hope-based trading. That’s a structural advantage built into the setup.
The profitable range runs from $652 to $669 — a 17-point zone where the position generates over 50% returns. Compare that to most credit spreads where you’re scratching out 10-15% returns with risk on both sides.
Timing helps too. One of the simplest ways to improve this trade is to wait for an intraday VIX spike, which has been happening almost every day. Elevated volatility lets you push strikes further and collect better credits, making the duckbill even more attractive.
The Only Real Risk Is Upside — And I Am Willing to Take It
Every trade has risk somewhere. With the duckbill, risk only shows up above $669, with break-even around $670 and max loss at $672.
Why am I willing to take that risk? Reaching $670 would mean SPY approaching the 50-day moving average, which would require unexpectedly strong news. Given the current environment, that’s a risk I am comfortable with.
When I constructed this trade, I worked the order live, adjusting strikes from $650 to $651 to $652 to get fills at my target credit. That’s the practical reality of executing these setups — you do not just click buttons and hope. You work the order until the risk-reward makes sense.
This volatility-centric approach also opens the door to complementary structures. For instance, the long-VanEck Semiconductor ETF (SMH), short-Magnificent Seven ETF (MAGS) pair trade remains a strong example of positioning that does not require a perfect directional call but still captures relative performance and volatility dislocations.
It’s a natural fit for traders looking to diversify beyond single-instrument spreads.
Most traders are taught to fear downside gaps and volatility. This structure flips that logic completely. The downside makes you money. The flat market makes you money. The only scenario that hurts you is a significant rally — and even then, you know exactly where your risk lives.
That is not luck. That is deliberate construction with clear parameters before you enter the trade.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
P.S. While The Iran War Rages On…
I’m coming out to reveal a “mistake” in the options market engine that helps anticipate where stocks might head next.
Even with the tension in the Middle East backing off a bit today, this same “mistake” just flashed a new opportunity on a ticker!
