Strategy: Sell n Puts,
Buy n Puts @ Lower Strike
(Same Expiry ≤ 56 DTE)
Example:
Price Chart: Uptrending
Current IV%: ≥ 60%
IV Rank: ≥ 70
Trade: Sell n put options; buy n put options lower strike.
Typical Strike Deltas:
Short Put ≥ 0.30 to 0.15
Long Put ≈ 2 to 5 strikes lower; based upon strike widths and premium (greater spread width increases risk)
Goals: Collect more premium from the OTM short put than paid for the farther OTM long put.
Manage: If the short put remains OTM, either let it expire worthless or close the trade for profit. If the underlying drops and threatens the short put, close the trade to prevent the short put from either being ITM at expiration or being exercised.
Profit: Close when this trade returns a profit of 30 percent or more.
Loss: Close when this trade approaches an 8 percent loss.