<<Trading By Numbers>>

p191, trader’s adage, “It’s better to have and not need than need and not have. ”

Straddle and Strangles – p129, You should err on the side of buying too much time.  BB squeeze BO.  Better use intraday chart.  Not using time above weekly. HV and IV both should be at a minimum. 

Calendar spread – Use rental property to lower down future’s cost base of ownership.  Neutral market, time decay represents the primary profit motive.

(this part of added on Aug 27:  Short-term neutral AND long-term bias outlook.   Post-earnings lull, capital required: net debit, back up plan behind a directional position.  You are long options, underlying moves into a consolidation, time erosion slowly eat away your capital, then you can use horizontal spread to offset the effect of time decay.)

Diagonal spread – Cabin in the woods, rent out during holidays only.  Require frequent maintenance.  MACD chart.  Long-leg strike above the H on the chart.  short-leg strike as close to low as possible.  p193, Short strike reduces the cost by 8.5% for just 2.6% of the remaining time.  At the same time, still 0.34 delta positive.

Butterfly spreads – p213, is best applied in flat markets with low and falling volatility.  benefits from realized volatility lower than IV.   European style broad-based BIG index options.  4-7 weeks remaining, time decay. Tightening BB. On the opposite side of straddle.  After a period of relatively high volat along with trending.   Wouldn’t expect squeeze as long as there is both direction and volatility.  Once you observe the squeeze, you should prepare to build butterfly.  Build your wings beyond BB. 

Iron condors – p226, identify S1,R1,S2,R2.  Combine any S and R together to create skewed iron condor based on where you think the strongest boundaries exist for your trade.