Neutral Outlook & Low Volatility

Directional Assumption:  Neutral


– 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/ThetaTime 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.

Categories: Strategies / Studies