Neutral Outlook & Low Volatility
Directional Assumption: Neutral
Setup:
– Sell near-term Put/Call around 30 DTE
– Buy longer-term Put/Call in the Back Month around 60 days DTE at the Same Strike Price for a net debit or credit.
Timeline:- The front-month option should be at least 30 days and not more than 45 days.
Ideal Implied Volatility Environment: 50% or lower IV. Rising IV will help this trade.
Max Profit: Credit received from opening trade. Max profit is realized when the stock price is between the short strikes at expiration.
Max Loss: The debit paid.
Time Decay/Theta: Time decay works in my favor.
Profit Target: If my position shows a 25% I will close the position early to lock in profits.
Risk Management: This trade can be scaled up to 1% of my account.
Break-Even Point(s):
It cannot be calculated due to options being in two different time periods.
The most I can lose is the debit I paid.
If the stock price moves too far from our strikes, the trade will become a loser.
