1. Short Strangle — the flagship
Sell one out-of-the-money call and one out-of-the-money put, same expiration, both around 16 delta. You collect premium from both sides and profit if the underlying stays between the strikes.
- Setup
- Short 16Δ call + short 16Δ put, same expiry. The strikes sit roughly at the one-standard-deviation expected-move boundary.
- When
- IV Rank above 50 (80+ is extreme and pays the best). Favor liquid index ETFs like SPY and QQQ — they're less prone to gap moves than single stocks.
- Entry DTE
- ~45 days. Enough time for theta decay to do the work, far enough from expiration to dodge accelerating gamma risk.
- Delta target
- ~16 on each side (≈84% chance of expiring out of the money per leg).
- Management
- Take profit at 50% of the credit received (buy the strangle back for half what you sold it for). Close at 21 DTE no matter what — win, lose, or flat. Never hold into expiration week.
- Defense
- If one side is tested, roll the untested side closer to the stock to collect more premium and cut deltas. If the move keeps going, roll the whole position out in time.
- Risk
- Undefined — but undefined risk is not unmanaged risk. Sizing, rolling, and the 21-DTE exit are the management.
What the data says: large-sample backtests of 45-DTE, 16-delta SPY strangles show ~90% win rates when winners are taken at 50% of max profit (average hold ~3 weeks), versus ~82% when held to expiration. Exiting at 21 DTE cuts the largest losses roughly in half and reduces long-run average losses by about 60%.
2. Iron Condor
The defined-risk cousin of the strangle: a short call spread stacked on a short put spread. You give up some premium to buy wings that cap your loss.
- Setup
- Short OTM call spread + short OTM put spread, same expiry. Short legs in the 16–20 delta range.
- Credit rule
- Aim to collect about one-third of the strike width in premium at entry — that's the sweet spot between payout and probability.
- When
- High-IV environments, same as the strangle.
- Entry DTE
- ~45 days; close at 21 DTE regardless of P/L.
- Management
- Close at 50% of max profit. No stop-loss on losers — the wings are the loss management. Max loss is capped at the width of the widest spread minus the credit received.
3. Cash-Secured Puts & the Wheel
The income strategy for stocks you actually want to own. Sell puts, collect premium, and if you're assigned the shares, sell covered calls against them — the "wheel" keeps turning.
- Setup
- Sell an out-of-the-money put with cash set aside to buy the shares if assigned.
- When
- High IV, and only on stocks you'd be happy to own at the strike price. If you wouldn't own it, don't sell the put.
- Management
- Close at 50% of max profit regardless of DTE — this maximizes win rate over time. If assigned, track your cost basis (premium received lowers your effective purchase price), then sell OTM covered calls on the shares to keep reducing basis.
- Loss control
- Consider closing if the loss reaches roughly 2–3× the premium received — a circuit breaker against the catastrophic tail. Undefined-risk sizing discipline applies.
4. Covered Calls
Own the shares, sell the upside you don't need. The simplest premium trade in the book.
- Setup
- Sell an out-of-the-money call against every 100 shares you own.
- When
- On stocks you own outright or were assigned via cash-secured puts (the wheel). Best with a flat to mildly bullish outlook.
- Management
- Roll the call up and/or out to keep collecting premium; every credit received lowers your cost basis. If the stock rips through the strike, rolling up lets you participate while staying mechanical.
5. Jade Lizard
A neutral-to-bullish premium structure: a short put plus a short call spread, sized so the net credit exceeds the call-spread width — which removes all upside risk.
- Setup
- Short put + short call spread (the call spread typically sits closer to at-the-money than the put). The defining rule: net credit must be greater than the width of the call spread.
- When
- Neutral to slightly bullish outlook; stocks or ETFs that have sold off with a high IV Rank. It exploits put skew — the tendency of downside puts to be priced richer than upside calls.
- Deltas
- Short put around 20–30 delta OTM; short call around 15–20 delta OTM; call-spread width typically $1–$5.
- Entry DTE
- ~45 days, same doctrine as the strangle family.
- Management
- Close at 50% of the original credit; manage at 21 DTE. No fixed stop-loss. Defend by rolling the untested side — e.g., if the stock rallies through the call spread, roll the short put up to collect more premium.
6. Vertical Credit Spreads
Defined-risk directional premium trades — the compact version of the condor's halves.
- Setup
- Sell an OTM spread and buy a further-OTM spread on the same side (bull put spread or bear call spread).
- When
- When you want a directional lean with capped risk, or when buying power is tight.
- Management
- Close at 50% of credit or at 21 DTE. No loss management required — risk is defined by the width of the spread.
7. Ratio Spreads
- Setup
- Sell more options than you buy at different strikes (e.g., 1×2 put ratio).
- Management
- Take profit at 30% of max profit. If the trade moves against you, roll out in time.
8. Broken-Wing Butterfly
- Setup
- An asymmetric butterfly with uneven wing widths, entered for a net credit.
- Management
- Take profit at 25% of max profit. No loss management required — risk is defined.
9. Diagonals
- Setup
- Long and short options at different strikes and different expirations — a calendar with a directional tilt.
- Management
- Take profit at 25% of max profit. If it moves against you, roll the near-month option forward.
Notice the pattern: every strategy on this page is managed by the same three levers — a profit target (usually 50% of max), a time exit (21 DTE), and a defense (roll). Learn the levers once; the structures are just packaging.
