Strategy: Buy n OTM Calls, Expire ≥ 90 DTE
Buy n OTM Puts, Same Expiry
Price Chart: A series of strong directional price moves
Current IV%: ≤ 25% (to reduce premium values)
IV Rank: ≈ 10 to 20
Trade: Buy n slightly OTM call options; buy n slightly OTM put options. (All options expire ≥ 90 DTE.)
Strike Deltas: (both 1 to 3 strikes OTM)
Long OTM Call ≥ 0.50
Long OTM Put ≤ −0.50
Goals: A strong directional price move benefits one of the long options as it moves deeper ITM. The opposite long option is closed as soon as the trader is confident in a sustained directional price move.
Manage: Watch for a strong directional price move. Respond by closing the losing long options and retaining the profitable long options as they move deeper ITM. Once a satisfactory profit is achieved, sell the remaining long options before a price reversal occurs.
Profit: Close when the remaining long options achieve a profit of 30 percent or more.
Loss: Close if the directional move changes and begins to reduce the value of the remaining option premium.