Bullish Outlook & Low Volatility

The Setup

Buy 1 ITM Call; Sell 1 OTM Call at Higher Strike Price for a net debit.


45-60 days until expiration is optimal.


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

Time Decay/Theta

Time works negatively against me. If the trade is not ITM (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 25-50% of the max potential gain, I will close the position early to lock in profits.

Break-Even Point(s)

Long call strike plus net debit paid.

Categories: Strategies / Studies