TT - WDIS: Strategy Checklist, 12/06/13

TastyTrade - Where Do I Start?

Jade Lizard

1. Ideal market condition:  High market volatility. Relatively high VIX.
2. Stock selection:  Extremely high IV Rank, or, oversold: (was $20 but now $15, with high IV Rank).
3. Strike selection:  Nearest OTM put, credit determines strikes for calls.
4. DTE:  Closest to 45 days.
5. Close:  At 50% of max potential profit.
6. Never adjust the call spread. Only repair the put if needed.

Iron Chicken (chicken iron condor)

1. Ideal market condition:  High market volatility.
2. Stock selection:  Decent IV, IV Rank over 50%.
3. Strike selection:  Whatever brings in closest to 50/50 reward to risk, about 45% of the width of the strikes.
4. DTE:  Closest to 45 days.
5. Close:  Between 35-45% of max potential profit.
6. Better to let go to expiration without any adjustments.

Calendar Spread

1. Ideal market condition:  Market volatility not as relevant.
2. Stock selection:  Low IV Rank, lots of liquidity. Stay away from binary inversion (back month IV higher due to a binary event).
3. Strike selection:  35% probability OTM, downside if bearish, upside if bullish. Generally, choose indexes for down moves and equities for up moves.
4. DTE:  About 15-25 days on front month, 45-55 days on back month.
5. Close:  For about 50% more than what you paid.
6. No adjustments for calendar spreads.

Ratio Spread

1. Ideal market condition:  High market volatility.
2. Stock selection:  High IV Rank.
3. Strike selection:  Buy ATM or nearest OTM. Sell farther OTM.
4. DTE:  is 45 days.
5. Close:  At around 45% of max profit.
6. Buy the synthetic short OTM option.  Ex. Suppose a stock is trading at $100, and you BTO +1 105C and STO -2 110C. If the stock goes from 100 up to 110, you would BTO +1 115C to create a butterfly.