Bullish Outlook & High Volatility

The Setup

Sell 1 OTM Put; Sell 1 OTM Call; Buy 1 OTM Call at Higher Strike Price.

Timeline

30-60 days until expiration is optimal. This gives enough time for theta to work out.

Volatility

Since I am a seller of this option I will only enter trade when IV is over 50%. The higher the better. Falling IV will help this trade as inversely rising IV will hurt the trade.

Time Decay/Theta

Time works in my favor as theta decay gives me money each day on the trade.

Risk Management

This trade can be scaled up to 1-2 % of my account.

Profit Target

If my position shows a profit near 50% of the max potential gain, I will close the position early to lock in profits.

Break-Even Point(s)

Short Put strike price minus the net credit received.

Categories: Strategies