Bullish Outlook & Low Volatility

The Setup

Sell 1 ATM Call; Buy 2 OTM Calls at Higher Strike Price for a net debit.


Enter trade for 45 – 90 days


Since I am a seller of this option I will only enter the trade when IV is below 50%. Rising IV will help this trade as inversely declining IV will hurt the trade.

Time Decay/Theta

Time decay works against me. If the position is not In The Money at expiration then it expires worthless.

Risk Management

This trade should be less than 1% of my account.

Profit Target

If my position shows a profit near 25% of the max potential gain, I will close the position early to lock in profits.

Break-Even Point(s)

There are two break-even points: 1) Short call strike plus net debit paid 2) Long call strike plus the difference between the long call strike and short call strike plus net debit.

Categories: Strategies / Studies