When to Take Profits on Credit Spreads: The 50% Rule Tested on SPX

By Charlie Nguyen · Published Nov 4, 2026 · Model data Jan 3, 2011 to Oct 23, 2026 · 10 min read

“Take profits at 50%” is the most repeated rule in credit spread trading. I tested it on SPX put credit spreads over 15 years of model data: holding to expiration vs profit targets of 25%, 50% and 75%, plus the popular 21 DTE exit. The answer is more interesting than “always take 50%”: it helps on short-dated spreads, it doesn’t pay on small credits after fees, and no profit target protects you from the tail.

What the 50% rule says

When you sell a credit spread, your max profit is the credit. The rule says: once the spread can be bought back for half of what you sold it for, close it. Sold for $1.00? Place a good-til-canceled buy order at $0.50 right after you open. You give up the second half of the credit to get out early.

Why closing early can pay

• Capital efficiency: money freed up early can go into the next trade. What matters is EV per day the money is at risk, not EV per trade.
• Gamma risk: near expiration, small SPX moves swing the spread’s value hard. The last part of the credit is the riskiest money to collect.
• Variance: fewer days in the trade means fewer chances for a gap to hit you.
• The cost: you pay commissions twice and give up premium you would usually have kept.

How I tested it

Every trading day from Jan 3, 2011 to Oct 23, 2026, the model opened two SPX put credit spreads at the close:

• 45 DTE, 10 delta, $20 wide (31 trading days to expiration). Median model credit $0.93, short strike a median 8.5% below SPX.
• 7 DTE, 9 delta, $50 wide (5 trading days). Median model credit $1.73, short strike a median 3.1% below SPX.

Each spread was then marked at every daily close and closed by one of the exit rules: hold to expiration, buy back at 25%, 50% or 75% of the credit, and for the 45 DTE spread a time exit at 21 days left (with or without a 50% target). There is no stop loss in this test, so the only thing that changes is the profit exit. See POP vs POT for why strikes get touched more often than they finish in the money.

Model backtest, not real fills. Option prices are Black-Scholes, with implied volatility from Cboe’s VIX9D (0.77 × VIX9D) for 7 DTE and VIX (0.73 × VIX) for 45 DTE, plus a put skew (σ rises 0.23–0.33 × per standard deviation below the forward) fitted to a real SPX put chain. Risk-free rate from the 13-week T-bill, dividend yield 1.8%. Fills at the model mid, checked at the daily close only, no slippage. Fees $2.60 per spread to open and again to close early, nothing at expiration (cash settled). P&L is per one spread ($100 multiplier). Results are hypothetical.

Results: 45 DTE spreads

What it shows. Before fees, a 50% target earned more per day in the trade than holding ($1.65 vs $1.30). After fees the edge disappears: $1.22 vs $1.22. A $20-wide spread at 10 delta only pays about $0.93, so a second $2.60 commission eats a big slice of a $0.46 profit. Trading one spread at a time, holding made the most ($9,656) and the 50% target lost money (−$1,423): it took far more trades, and each extra trade is another shot at a max loss.

The 21 DTE exit is a different tool. It cut max losses to 0.13% of trades (from 2.46%) and the worst 1% of trades to −$1,045 (from −$1,911), but EV per day fell to $0.44, and the win rate dropped to 80.7% because many trades closed at a small loss after fees.

Results: 7 DTE spreads

What it shows. Here the 50% rule works. P&L per day rose to $13.95 from $12.25 holding, and win rate went to 97.0% from 96.2%. The credit is bigger ($1.73 median), so fees matter less, and short-dated spreads decay fast: the average 50% exit came after 2.5 days. Trading one at a time, the 75% target made the most ($56,875, vs $48,529 at 50% and $40,340 holding) with the smallest drawdown, so the 50% rule did not win on every measure.

What targets don’t fix: the tails

A profit target only closes winners. A trade that goes against you from day one never reaches it, so the worst trade was about the same under every target: −$1,919 vs −$1,919 on the 45 DTE spread and −$4,879 vs −$4,871 on the 7 DTE spread. Targets cut how often you take a max loss (on 7 DTE from 1.36% to 1.11% of trades), not how big it is. Tail risk is handled by size and a stop, not by a profit target.

Example: setting the target on a real spread

Here is the SPX Desk’s 7DTE model spread from the Nov 3, 2026 close, with the 50% buy-back order you would set right after entry. P50 is the model’s chance of reaching that 50% target before expiration. It’s an illustration, not a recommendation; its credit was below the Desk’s own $1.20 minimum that day.

EXAMPLE, model figures. Cboe delayed SPXW quotes at the close, credit at the mids, SPX 7,568.92. POP = chance of any profit at expiration; POT = chance SPX touches the short strike first; P50 = chance the spread can be bought back for half the credit. Lognormal model at the short strike’s IV 16.1%, rate 4.03%, P50 from 40,000 simulated paths. See POP vs POT vs P50 and IV rank explained.

The advantage-play view

A good advantage player cares about EV per hour, not EV per hand, and about never going broke. Same here:

• EV per day, not per trade. Holding wins more per trade every time; what matters is how fast your bankroll compounds.
• Cut variance that doesn’t pay. The last days before expiration carry the most gamma for the least premium. On short-dated SPX spreads, getting out at 50% paid more per day and lowered the max-loss rate.
• Free the bankroll for the next +EV bet. A closed trade is buying power ready for the next good setup (more in bankroll management for +EV options).
• Don’t let costs eat the edge. On small credits, the second commission can be most of the gain. Know your fees before you pick a target.
• Never blow up. No target fixes the tail. Size every spread so its max loss is a small slice of the account.

My take-profit rules

1. Short-dated SPX spreads: set the 50% buy-back order at entry. It raised EV per day in the test and cut the max-loss rate.
2. Small credits: check the fees first. If closing costs a big share of half the credit, holding or a higher target can be better.
3. Longer-dated spreads: a time exit is a risk tool, not a profit tool. Use it to cut tail risk, knowing it costs EV.
4. Pick strikes outside the expected move with Open Lines (why), and sell more when IV rank is high.
5. Trade SPX for cash settlement and Section 1256 tax treatment (SPX vs SPY options), so a target or time exit never leaves you holding shares.
6. Size for the worst trade, not the average one.

Sources and method. SPX, VIX, VIX9D and 13-week T-bill daily closes from Yahoo Finance (Jan 3, 2011 to Oct 23, 2026); VIX and VIX9D are calculated by Cboe. 3,945 45 DTE and 3,970 7 DTE overlapping daily entries (every trading day). “One at a time” runs a single spread, re-entering at the next close after each exit, and reports its total P&L and max drawdown per spread. Win = P&L above zero after fees. Max loss = a loss of 90% or more of the spread’s max risk. The 21 DTE exit closes the 45 DTE spread after 16 trading days (15 left). Model figures, not historical option quotes; results are hypothetical. Example: Cboe delayed SPXW quotes (Nov 3, 2026 close); SPX contract terms from Cboe SPX specifications. Code: raw/tp50/backtest.py.

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