Strategy: Sell n OTM Calls, Expire ≤ 56 DTE
Buy n OTM Calls, Higher Strike, Same Expiry
Sell n OTM Puts, Same Expiry
Buy n OTM Puts, Lower Strike, Same Expiry
Price Chart: Neutral to slight downward price trend
Current IV%: ≈ 50%
IV Rank: ≈ 40 to 60
Trade: Sell n OTM call options; buy n OTM call options, higher strike; sell n OTM put options; buy n OTM put options, lower strike (all options at same expiration, ≤ 56 DTE).
Typical Strike Deltas:
Short Call ≤ −0.25
Long Call ≈ 2 or more strikes farther OTM than short call
Short Put ≤ 0.25
Long Put ≈ 2 or more strikes farther OTM than short put
Manage: If the price of the underlying security remains within a narrow range, let the options expire worthless. If a price rally or drop occurs and threatens one of the vertical spreads, close the vulnerable position and retain the safe spread until it either expires worthless or can be closed for a reasonable profit.
Profit: Close when this strategy achieves a profit of 30 percent or more.
Loss: Close when a loss in premium value becomes 8 percent or less.