The Crazy Calendar strategy is a weekly income strategy on SPY that combines calendar spreads with diagonal credit spreads to create a high-probability, defined-risk trade structure. This document provides everything needed to implement this strategy mechanically, including theory, mechanics, market condition filters, position management, and operational checklists.
Target Performance: $25-75 average weekly profit per unit
Win Rate Target: 80-90% (with conditional filters applied)
Maximum Risk Per Trade: $300-500 per unit
Capital Requirement: Minimum $5,000 recommended per unit traded
- Theory and Foundation
- Why This Strategy Works
- Strategy Mechanics
- Market Condition Filters
- Strike Selection and DTE Guidelines
- Position Sizing and Risk Management
- Entry Conditions and Process
- Exit Conditions and Profit Taking
- Adjustment Framework
- Mechanical Execution Checklists
- Record Keeping and Performance Tracking
- Risk Scenarios and Contingencies
- Appendix: Reference Tables and Formulas
The Crazy Calendar strategy exploits differential time decay between options expiring on different dates while using credit spread structures to finance the position and eliminate downside risk.
Before understanding the strategy mechanics, recognize that position sizing determines long-term success more than strategy selection.
| Position Size | Outcome in Favorable Game |
|---|---|
| Too small (1%) | Suboptimal growth |
| Optimal (10-25%) | Maximum geometric growth |
| Too large (40%+) | Account destruction despite positive edge |
Key Principle: A mathematically favorable strategy becomes a losing strategy with incorrect position sizing. This strategy is designed for conservative sizing that enables consistent compounding.
Small consistent gains compound dramatically:
| Weekly Average | 5-Year Result (from $5,000) |
|---|---|
| $10 | ~$40,000 |
| $25 | ~$215,000 |
| $50 | ~$849,000 |
| $75 | ~$1,900,000 |
The goal is not maximizing individual trade profit but maximizing long-term geometric growth through consistent, high-probability income.
Options lose value as expiration approaches, but this decay accelerates dramatically in the final days.
Time Decay Acceleration (Theta)
Days to Expiration Relative Decay Rate
30 1x (baseline)
14 1.5x
7 2x
3 3x
1 5x+
The Edge: Friday-expiring options decay faster than Monday-expiring options. By being short Friday and long Monday at the same strike, you capture this differential.
A calendar spread profits when:
- The underlying stays near the strike price
- Time passes (short option decays faster than long)
- Implied volatility increases (helps the longer-dated option more)
Problem: Standalone calendar spreads have low probability (~32%) because they require price to stay in a narrow range.
Solution: Finance the calendars with a credit spread, creating guaranteed profit zones and pushing risk far from current price.
By adding a diagonal credit spread:
- The net position becomes a credit (guaranteed minimum profit if market drops)
- Risk is pushed entirely to the upside
- Probability of profit increases dramatically (to 77%+ even before filtering)
SPY, as a broad market index, has natural characteristics that favor this strategy:
| Factor | Benefit |
|---|---|
| Diversification | No single-stock gap risk |
| Liquidity | Tight spreads, easy fills |
| Mean reversion | Extended moves tend to correct |
| No takeover risk | Cannot gap 30% on acquisition news |
| Options availability | Monday/Wednesday/Friday expirations enable the structure |
Critical Understanding: While individual stocks can gap 15%+ overnight, SPY rarely moves more than 3-4% in a week under normal conditions. This "governor" effect means the upside risk zone is statistically unlikely to be reached.
The Crazy Calendar consists of two components placed as a single order:
CALENDAR SPREAD x3
├── SELL 3x SPY [Friday expiration] [Strike A] Calls
└── BUY 3x SPY [Monday expiration] [Strike A] Calls
Typical Debit: $0.25-0.35 per spread ($0.75-1.05 total)
DIAGONAL SPREAD x1
├── SELL 1x SPY [Friday expiration] [Strike B] Call (lower strike)
└── BUY 1x SPY [Monday expiration] [Strike A] Call (same as calendar)
Typical Credit: $1.00-1.50
NET POSITION:
├── SHORT 1x Friday [Strike B] Call
├── SHORT 3x Friday [Strike A] Call
└── LONG 4x Monday [Strike A] Call
Net Credit Target: $0.30-0.50
Profit/Loss at Friday Expiration
Profit
│
+400 ┤ ∧
│ / \
+200 ┤ / \
│ / \
+100 ┤ / \
│ / \
+37 ┤─────────────/ \
│ (credit) \
0 ┤ \
│ \
-100 ┤ \
│ \
-300 ┤ \────────
│
└──────┬──────┬──────┬──────┬──────┬─────
380 385 390 395 400 405
SPY Price
Key Zones:
• Below Strike B: Guaranteed profit = credit received
• Strike B to Strike A: Rising profit zone
• At Strike A: Maximum profit potential
• Above Strike A: Declining profit, eventually loss
• Far above Strike A: Maximum loss (capped)
| Greek | Position Exposure | Implication |
|---|---|---|
| Theta | Positive | Profits from time decay (primary edge) |
| Delta | Slightly negative to neutral | Slight bearish bias; large rallies hurt |
| Gamma | Negative near strikes | Rapid moves in either direction can hurt |
| Vega | Slightly positive | Benefits from IV expansion |
Setup Date: Monday
SPY Price: $450
VIX: 17
TRADE STRUCTURE:
Calendar Spreads (3x):
SELL 3x SPY Feb 9 (Fri) 455 Call @ $1.85
BUY 3x SPY Feb 12 (Mon) 455 Call @ $2.10
Debit per spread: $0.25
Total Calendar Debit: $0.75 (x3 = $75)
Diagonal Credit Spread (1x):
SELL 1x SPY Feb 9 (Fri) 453 Call @ $2.80
BUY 1x SPY Feb 12 (Mon) 455 Call @ $2.10
Credit: $0.70 ($70)
Net Position:
Calendar Debit: -$75
Diagonal Credit: +$112 (includes the 4th long 455 call)
Actual combined order credit: $0.37 ($37)
Risk Profile:
• If SPY drops: Keep $37 (minimum guaranteed)
• If SPY at 455 Friday: ~$350 profit potential
• If SPY at 460 Friday: ~$100 profit
• If SPY above 465: Loss zone begins
• Maximum loss: ~$350 (at ~470+)
The VIX level affects premium availability and probability of large moves.
| VIX Range | Signal | Action |
|---|---|---|
| Below 12 | NO TRADE - Premiums insufficient | |
| 12-14 | 🟡 Marginal | Trade with reduced size or tighter targets |
| 14-22 | 🟢 Optimal | Full position, standard parameters |
| 22-28 | 🟡 Elevated | Trade with caution, tighter profit targets |
| Above 28 | 🔴 Too High | NO TRADE - Large move probability too high |
Compare VIX to VIX3M (or front-month VIX futures to back-month).
| VIX/VIX3M Ratio | Condition | Signal |
|---|---|---|
| Below 0.90 | Strong Contango | 🟢 Excellent - Market expects calm |
| 0.90-0.95 | Normal Contango | 🟢 Good - Favorable conditions |
| 0.95-1.00 | Flat | 🟡 Acceptable - Proceed with caution |
| 1.00-1.10 | Mild Backwardation | 🟡 Caution - Near-term fear elevated |
| Above 1.10 | Strong Backwardation | 🔴 NO TRADE - Market pricing turbulence |
How to Check:
- Compare VIX to VIX3M on CBOE website
- Check VIX futures curve at vixcentral.com
- Calculate ratio: VIX ÷ VIX3M
Recent market movement predicts near-term movement (volatility clustering).
Calculation: 5-Day Average True Range as percentage of SPY price
5-Day ATR% = (5-Day ATR / SPY Price) × 100
Example:
5-Day ATR = $5.50
SPY Price = $450
5-Day ATR% = 1.22%
| 5-Day ATR% | Signal | Action |
|---|---|---|
| Below 0.8% | 🟢 Low volatility | Excellent conditions |
| 0.8-1.2% | 🟢 Normal | Good conditions |
| 1.2-1.8% | 🟡 Elevated | Proceed with caution |
| Above 1.8% | 🔴 High | NO TRADE - Too much movement |
Additional Check: Compare current 5-Day ATR% to its 20-day average
- Current < 20-day average: Favorable
- Current > 20-day average: Unfavorable
The strategy loses on sharp rallies, so market positioning matters.
| Condition | Measurement | Signal |
|---|---|---|
| SPY vs 20-Day MA | > 3% above | 🔴 Extended - higher reversal risk but also breakout risk |
| SPY vs 20-Day MA | 1-3% above | 🟡 Slightly extended |
| SPY vs 20-Day MA | Within ±1% | 🟢 Neutral - ideal |
| SPY vs 20-Day MA | 1-3% below | 🟢 Favorable - limited upside pressure |
| SPY vs 20-Day MA | > 3% below | 🟡 Oversold - bounce risk |
RSI(14) Supplementary Check:
| RSI Level | Interpretation |
|---|---|
| Above 70 | Overbought - momentum may slow (favorable) |
| 50-70 | Neutral to bullish |
| 30-50 | Neutral to bearish |
| Below 30 | Oversold - bounce likely (unfavorable for new entries) |
Binary events can overwhelm all other factors.
HARD RULE: No new positions within 48 hours before:
| Event Type | Examples |
|---|---|
| Fed Announcements | FOMC decisions, Fed Chair speeches |
| Economic Data | NFP, CPI, PPI, GDP |
| Options Expiration | Monthly OpEx, Quarterly OpEx |
| Major Earnings | AAPL, MSFT, NVDA, GOOGL, AMZN, META, TSLA |
| Political Events | Elections, major policy announcements |
Resources for Event Tracking:
- Federal Reserve Calendar: federalreserve.gov
- Economic Calendar: tradingeconomics.com, investing.com
- Earnings Calendar: earningswhispers.com
| Factor | Observation | Application |
|---|---|---|
| Monday entries | Full week of theta decay | Preferred entry day |
| Tuesday entries | Acceptable | Standard parameters |
| Wednesday+ entries | Reduced time value | Avoid or use different expiration cycle |
| Month-end | Rebalancing flows | Slight caution |
| Quarter-end | Larger rebalancing | Increased caution |
| Holiday weeks | Reduced liquidity | Reduced size or skip |
| Component | Expiration | DTE at Entry |
|---|---|---|
| Short options | Friday | 4-5 days (if entering Monday) |
| Long options | Following Monday | 7-8 days (if entering Monday) |
The 3-Day Differential: The strategy requires approximately 3 calendar days between short and long expirations to capture meaningful theta differential.
Goal: Position the profit peak where you want maximum profit potential
| Market Condition | Strike A Placement |
|---|---|
| Neutral outlook | ATM to 1% OTM (above current price) |
| Slightly bullish | 1-2% OTM |
| Slightly bearish | ATM or slightly ITM |
Standard Approach:
Strike A = Round(SPY Price × 1.01) to nearest strike
Example: SPY at $448 → Strike A = $453 or $455
Goal: Generate enough credit to finance calendars while maintaining profit zone
Strike B = Strike A - $2 to $5
Example:
Strike A = $455
Strike B = $452 or $453
Relationship Rules:
- Wider gap (Strike A - Strike B): More credit, narrower profit zone
- Tighter gap: Less credit, wider profit zone
- Minimum gap: $2 (to ensure meaningful credit)
- Maximum gap: $5 (beyond this, profit zone becomes too narrow)
| VIX Level | Strike A Distance from ATM | Strike Gap (A - B) |
|---|---|---|
| 14-16 | +0.5% to +1% | $2-3 |
| 16-20 | +1% to +1.5% | $3-4 |
| 20-25 | +1.5% to +2% | $4-5 |
SPY at $450, VIX at 17
| Component | Strike | Expiration |
|---|---|---|
| Short Diagonal Call | $453 | Friday |
| Short Calendar Calls (3x) | $456 | Friday |
| Long Calls (4x) | $456 | Monday |
Fundamental Rule: Never risk more than 10% of account on a single trade.
| Account Size | Maximum Units | Maximum Risk |
|---|---|---|
| $5,000 | 1 unit | $400-500 |
| $10,000 | 2 units | $800-1,000 |
| $25,000 | 5 units | $2,000-2,500 |
| $50,000 | 10 units | $4,000-5,000 |
| $100,000 | 20 units | $8,000-10,000 |
As your account grows, increase position size at these thresholds:
COMPOUNDING SCALE
Account Value Units to Trade
$5,000 1
$7,500 1-2
$10,000 2
$15,000 3
$20,000 4
$25,000 5
$35,000 7
$50,000 10
$75,000 15
$100,000 20
Rule: Only scale up after 4 consecutive weeks at the new account level.
| Drawdown from Peak | Action |
|---|---|
| 0-10% | Normal trading |
| 10-15% | Reduce to 75% of normal size |
| 15-20% | Reduce to 50% of normal size |
| 20-25% | Reduce to 25% of normal size |
| >25% | Pause trading, review strategy |
| Loss Threshold | Action |
|---|---|
| Single trade max loss | Accept it, trade next week normally |
| 2 consecutive losses | Reduce next trade to 50% size |
| 3 consecutive losses | Skip one week, then resume at 50% size |
| 4+ consecutive losses | Full strategy review, pause for 2 weeks minimum |
Best Entry Window: Monday 10:30 AM - 2:00 PM Eastern
| Time | Consideration |
|---|---|
| Before 10:00 AM | Avoid - opening volatility, wide spreads |
| 10:00-10:30 AM | Market settling, can begin analysis |
| 10:30 AM-12:00 PM | Optimal - settled spreads, full day data |
| 12:00-2:00 PM | Good - adequate time for fills |
| 2:00-3:00 PM | Acceptable - may have tighter fills |
| After 3:00 PM | Avoid - reduced time for management if needed |
All conditions must be checked before every entry.
ENTRY QUALIFICATION SCORECARD
REQUIRED CONDITIONS (Must Pass All):
□ VIX below 28 Pass/Fail
□ VIX not in backwardation (ratio < 1.05) Pass/Fail
□ No major events within 48 hours Pass/Fail
SCORED CONDITIONS (Need 4+ points):
□ VIX between 14-22 +1 point
□ VIX/VIX3M ratio below 0.95 +1 point
□ 5-Day ATR% below 20-day average +1 point
□ SPY within 2% of 20-day MA +1 point
□ RSI(14) between 40-65 +1 point
TOTAL SCORE: ___/5
DECISION MATRIX:
• 5 points + all required: FULL POSITION, standard targets
• 4 points + all required: FULL POSITION, consider tighter exits
• 3 points + all required: HALF POSITION or SKIP
• Below 3 or required failed: NO TRADE
Step 1: Verify all filters pass (Section 7.2)
Step 2: Calculate strikes
Strike A = SPY Price × 1.01 (rounded to nearest $1)
Strike B = Strike A - $3 (adjust based on VIX)
Step 3: Build the order
Order Type: Net Credit
Legs:
SELL 1x [Friday] [Strike B] Call
SELL 3x [Friday] [Strike A] Call
BUY 4x [Monday] [Strike A] Call
Step 4: Set limit price
Target Credit: $0.35-0.50
Initial Limit: Mid-price of natural spread
Adjust: Every 2-3 minutes by $0.01-0.02 toward market if not filled
Maximum Time: 30 minutes (abandon if not filled)
Step 5: Verify fill
- Confirm all legs executed
- Record entry details in trade log
- Set calendar reminder for management checkpoints
| Account Stage | Primary Target | Maximum Target |
|---|---|---|
| Learning (Months 1-3) | $40-50 | $75 |
| Developing (Months 4-6) | $50-75 | $100 |
| Proficient (Months 7+) | $75-100 | $150 |
Core Principle: Take profits when available. The goal is consistent income, not home runs.
| Condition | Action |
|---|---|
| Position value reaches profit target | Exit immediately |
| 2 days remain and position at 50%+ of target | Exit |
| Profit exceeds $100 | Consider exiting regardless of time |
| Market shows reversal signs after strong move toward profit peak | Exit |
| Days Remaining | Position Status | Action |
|---|---|---|
| 2+ days | Any profit | Hold for target |
| 2+ days | Small loss (<$50) | Hold |
| 1 day | Any profit ≥$25 | Exit |
| 1 day | At or near entry | Hold to expiration |
| 1 day | In loss zone | Hold - let probabilities work |
| Expiration day | Any position | Let expire or close based on value |
CRITICAL RULE: Do NOT panic exit when position moves against you.
| Scenario | Action |
|---|---|
| SPY rallies toward profit peak | Hold - this is the ideal outcome |
| SPY rallies through profit peak | Hold - peak moves with time, still profitable zone |
| SPY enters loss zone (pre-expiration) | Hold - high probability of mean reversion |
| SPY in loss zone at expiration | Accept loss, close position |
| SPY gaps beyond all strikes | Close for max loss, do not hope |
Loss Acceptance Framework:
When you enter a trade, you accept the maximum risk.
Period. No exceptions. No hoping. No adjusting into a worse situation.
Step 1: Monitor position value (check at least 3x daily)
Step 2: When target reached, build closing order
Order Type: Net Debit (to close for profit)
Legs: Opposite of entry
BUY 1x [Friday] [Strike B] Call (to close)
BUY 3x [Friday] [Strike A] Call (to close)
SELL 4x [Monday] [Strike A] Call (to close)
Step 3: Execute at market or near market price
- Don't get greedy trying to squeeze an extra $5-10
- When target is hit, exit promptly
Core Principle: This strategy is designed to be low-maintenance. The best "adjustment" is proper entry selection and patience.
Adjustment Hierarchy:
- Do nothing (preferred 90% of the time)
- Exit early for profit
- Exit early for reduced loss
- Adjust (rare, specific circumstances only)
| Scenario | Consider Adjustment? |
|---|---|
| Position profitable, want more | No - exit and wait for next week |
| Position at small loss, worried | No - trust the structure |
| Major unexpected event occurs | Maybe - evaluate based on specifics |
| SPY gaps significantly (>3%) | Maybe - may need to close |
| Position deep in loss zone day before expiration | No - accept the loss |
When: SPY has rallied significantly, position moving toward loss zone, 2+ days remain
Action:
Close the existing diagonal:
BUY back the short [Strike B] call
Open new diagonal at higher strike:
SELL [Strike B + $3] call (same expiration)
Effect: Collects additional credit, moves breakeven higher
Cost: Locks in partial loss on original diagonal, increases margin
When: SPY rallied but stopped, IV increased, 2+ days remain
Action:
Add 1-2 additional calendar spreads at current ATM strike
Effect: Creates new profit peak near current price
Cost: Adds debit, increases position risk
- Maximum one adjustment per trade
- No adjustments with less than 24 hours to expiration
- No adjustments that increase maximum risk beyond original
- No adjustments that turn a credit position into a debit position
- If uncertain, do nothing
WEEKLY PREPARATION CHECKLIST
Date: _______________
MARKET ANALYSIS:
□ Check economic calendar for week (Fed, data, earnings)
□ Note any events within trade window
□ Review SPY weekly chart for context
□ Identify any unusual situations (holidays, etc.)
PRELIMINARY FILTER CHECK:
□ Current VIX level: _______
□ VIX3M level: _______
□ VIX/VIX3M ratio: _______ (<1.05 required, <0.95 preferred)
□ 5-Day ATR: _______
□ 5-Day ATR%: _______
□ 20-Day ATR%: _______
□ SPY 20-Day MA: _______
□ SPY current vs 20-Day MA: _______% (within 2% preferred)
□ RSI(14): _______
INITIAL DECISION:
□ All required conditions pass? Yes / No
□ Point score (scored conditions): ___/5
□ Proceed with entry planning? Yes / No / Wait for conditions
If NO: Document reason, schedule re-check for Tuesday
ENTRY EXECUTION CHECKLIST
Date: _______________
Time Started: _______________
PRE-ENTRY VERIFICATION:
□ Re-check all filters (conditions may have changed overnight)
□ VIX: _______ (14-22 ideal)
□ VIX/VIX3M: _______ (<1.05 required)
□ No breaking news or unexpected events
□ Spreads appear normal (no unusual widening)
STRIKE CALCULATION:
□ SPY Current Price: $_______
□ Strike A (calendar): $_______ (SPY × 1.01, rounded)
□ Strike B (diagonal short): $_______ (Strike A - $3)
□ Verify Friday expiration available
□ Verify Monday expiration available
ORDER CONSTRUCTION:
□ Build order in platform:
SELL 1x [Friday] $_______ Call
SELL 3x [Friday] $_______ Call
BUY 4x [Monday] $_______ Call
□ Order type: Net Credit
□ Natural spread mid-price: $_______
□ Initial limit: $_______ (start at mid or slightly below)
ORDER SUBMISSION:
□ Double-check all legs and quantities
□ Submit order
□ Start timer: _______ (30-minute max wait)
□ Adjust limit by $0.01-0.02 every 3-5 minutes if needed
FILL CONFIRMATION:
□ Order filled at: $_______ Time: _______
□ All legs confirmed
□ Position appears correctly in portfolio
□ Calculate position Greeks for reference:
Delta: _______
Theta: _______
POST-ENTRY:
□ Record trade in log
□ Set profit target order: $_______
□ Set calendar reminders for daily checks
□ Screenshot position for records
DAILY MONITORING CHECKLIST
Date: _______________
Day: □ Tuesday □ Wednesday □ Thursday
MORNING CHECK (10:30 AM):
□ SPY Price: $_______
□ Position P/L: $_______
□ Distance to breakeven: _______
□ VIX level: _______
□ Any unexpected news? _______
EVALUATION:
□ At or above profit target? → EXIT
□ Significant profit (>$75) with 2+ days left? → Consider exit
□ In profit zone, below target? → Hold
□ Near entry, small loss? → Hold
□ In loss zone? → Hold (do NOT panic)
ACTION TAKEN:
□ No action - holding
□ Exited for profit at: $_______
□ Exited for loss at: $_______
□ Adjustment made: _______________________
AFTERNOON CHECK (2:30 PM):
□ Re-evaluate if morning showed concerning movement
□ Confirm no new events announced
□ Position P/L: $_______
NOTES:
_________________________________________________
_________________________________________________
EXPIRATION DAY CHECKLIST
Date: _______________
MORNING EVALUATION (10:00 AM):
□ SPY Price: $_______
□ Position P/L: $_______
□ Position status:
□ Profitable - plan to close
□ Near breakeven - evaluate
□ In loss zone - hold to expiration
DECISION FRAMEWORK:
If profitable ≥$25:
□ Close position
□ Exit price: $_______
If near breakeven:
□ Evaluate theta remaining vs. gamma risk
□ Close or hold based on risk tolerance
If in loss zone:
□ Hold to expiration (let pins/movement work)
□ Do NOT panic close for larger loss
CLOSING ACTIONS:
□ Close position by 3:30 PM (avoid pin risk and last-minute volatility)
□ Closing P/L: $_______
POST-TRADE:
□ Record final P/L in log
□ Note lessons learned
□ Calculate running statistics
□ Prepare for next week's analysis
WEEKLY REVIEW CHECKLIST
Week of: _______________
TRADE SUMMARY:
□ Trade taken this week? Yes / No
□ If No, reason: _________________________
□ Entry credit: $_______
□ Exit: $_______ (profit/loss)
□ Net P/L: $_______
□ Days held: _______
PERFORMANCE METRICS:
□ This week's P/L: $_______
□ Month-to-date P/L: $_______
□ Year-to-date P/L: $_______
□ Consecutive wins: _______
□ Consecutive losses: _______
□ Win rate (rolling 12 weeks): _______%
EXECUTION QUALITY:
□ Filters applied correctly? Yes / No
□ Entry timing good? Yes / No
□ Exit execution good? Yes / No
□ Followed all rules? Yes / No
□ Any deviations? _________________________
LESSONS:
□ What worked well: _________________________
□ What could improve: _________________________
□ Rule modifications needed: _________________________
NEXT WEEK PREPARATION:
□ Check next week's economic calendar
□ Any holidays or special situations? _______
□ Preliminary filter check scheduled for: _______
| Field | Description |
|---|---|
| Trade # | Sequential number |
| Week of | Monday date |
| Entry Date/Time | When position opened |
| SPY Entry Price | Price at entry |
| VIX at Entry | For filter verification |
| Strike A | Calendar strike |
| Strike B | Diagonal short strike |
| Entry Credit | Net credit received |
| Exit Date/Time | When closed |
| Exit P/L | Profit or loss |
| Days Held | Duration |
| Filter Score | Qualification score at entry |
| Notes | Any relevant observations |
Weekly Metrics:
- P/L (dollars and percentage of account)
- Win/Loss
- Hold duration
- Entry filter score
Monthly Metrics:
- Total P/L
- Win rate
- Average win size
- Average loss size
- Largest win
- Largest loss
- Number of trades taken
- Number of trades filtered out
Quarterly/Annual Metrics:
- Cumulative P/L
- Return on capital
- Maximum drawdown
- Win rate
- Profit factor (gross wins / gross losses)
- Average weekly income
- Weeks traded vs. available weeks
| Metric | Target | Acceptable | Review Needed |
|---|---|---|---|
| Win Rate | >80% | 70-80% | <70% |
| Avg Win | >$50 | $35-50 | <$35 |
| Avg Loss | <$150 | $150-250 | >$250 |
| Profit Factor | >2.0 | 1.5-2.0 | <1.5 |
| Monthly Return | >4% | 2-4% | <2% |
| Max Drawdown | <15% | 15-20% | >20% |
| Aspect | Outcome |
|---|---|
| Position P/L | Guaranteed profit = credit received |
| Action needed | None - let expire worthless for full credit |
| Next week | Excellent conditions likely (elevated VIX) |
| Aspect | Outcome |
|---|---|
| Position P/L | Near maximum profit (best case) |
| Action needed | Exit at profit target |
| Next week | Normal conditions expected |
| Aspect | Outcome |
|---|---|
| Position P/L | Solid profit (in profit zone) |
| Action needed | Exit at profit target |
| Next week | Slightly elevated caution |
| Aspect | Outcome |
|---|---|
| Position P/L | Reduced profit or small loss |
| Action needed | Hold - may return to profit zone |
| Next week | Evaluate carefully, may skip |
| Aspect | Outcome |
|---|---|
| Position P/L | Loss zone, potentially max loss |
| Action needed | Accept loss, close at expiration |
| Next week | Skip - conditions need to settle |
| Event | Response |
|---|---|
| Flash crash | Position profits; no action needed |
| Overnight gap down | Position profits; may close early |
| Overnight gap up (3%+) | Assess damage; likely hold to expiration |
| Trading halt | Hold; reassess when trading resumes |
| Platform outage | Use backup broker or phone to close if needed |
| Personal emergency | Set worst-case exit orders in advance |
Must Have:
- Backup broker account (funded, approved for same strategies)
- Mobile app access
- Broker phone number saved
- Written position details accessible offline
Recommended:
- Email alerts for significant price moves
- Daily account screenshot/backup
- Written emergency procedures
| SPY Price | Strike A (+1%) | Strike B (-$3) |
|---|---|---|
| $430 | $434-435 | $431-432 |
| $440 | $444-445 | $441-442 |
| $450 | $454-455 | $451-452 |
| $460 | $464-465 | $461-462 |
| $470 | $475 | $472 |
| $480 | $485 | $482 |
| $490 | $495 | $492 |
| $500 | $505 | $502 |
VIX DECISION MATRIX
VIX < 12: NO TRADE (premiums too thin)
VIX 12-14: MARGINAL (reduce size)
VIX 14-22: OPTIMAL (full position)
VIX 22-28: CAUTION (tighter targets)
VIX > 28: NO TRADE (too volatile)
VIX/VIX3M RATIO:
< 0.90: EXCELLENT
0.90-0.95: GOOD
0.95-1.00: ACCEPTABLE
1.00-1.05: CAUTION
> 1.05: NO TRADE
POSITION SIZE FORMULA:
Max Units = Floor(Account Value × 0.10 / Max Risk per Unit)
Where:
- Max Risk per Unit ≈ $400-500
- Floor = round down to nearest whole number
EXAMPLES:
Account $5,000: ($5,000 × 0.10) / $450 = 1.1 → 1 unit
Account $10,000: ($10,000 × 0.10) / $450 = 2.2 → 2 units
Account $25,000: ($25,000 × 0.10) / $450 = 5.5 → 5 units
Account $50,000: ($50,000 × 0.10) / $450 = 11.1 → 10 units (cap at 10)
PROFIT TARGET FORMULA:
Conservative Target = Entry Credit × 1.5
Standard Target = Entry Credit × 2.0
Aggressive Target = Entry Credit × 3.0
Maximum Target Cap: $150 (regardless of calculation)
EXAMPLE (Entry Credit $0.40 = $40):
Conservative: $40 × 1.5 = $60
Standard: $40 × 2.0 = $80
Aggressive: $40 × 3.0 = $120
FILTER SCORE CALCULATION
Required Conditions (all must pass):
1. VIX < 28
2. VIX/VIX3M ratio < 1.05
3. No major events within 48 hours
Scored Conditions (1 point each):
1. VIX between 14-22
2. VIX/VIX3M ratio < 0.95
3. 5-Day ATR% < 20-Day ATR%
4. SPY within 2% of 20-day MA
5. RSI(14) between 40-65
DECISION:
5 points: Full position
4 points: Full position (tighter exits)
3 points: Half position or skip
<3 points: No trade
EXPECTED VALUE FORMULA:
EV = (Win Rate × Avg Win) - (Loss Rate × Avg Loss)
TARGET METRICS:
Win Rate: 80% (0.80)
Loss Rate: 20% (0.20)
Avg Win: $60
Avg Loss: $200
EV = (0.80 × $60) - (0.20 × $200)
EV = $48 - $40
EV = +$8 per trade
ANNUALIZED (40 trades/year):
$8 × 40 = $320 expected profit per unit per year
(This is conservative; actual targets are higher)
5-YEAR PROJECTION: $25/Week Average, Starting $5,000
Year 1: $5,000 → $8,200 (64% growth)
Year 2: $8,200 → $16,500 (101% growth)
Year 3: $16,500 → $38,000 (130% growth)
Year 4: $38,000 → $92,000 (142% growth)
Year 5: $92,000 → $215,000 (134% growth)
Note: Assumes scaling position size per compounding schedule
Actual results will vary based on execution and market conditions
| Version | Date | Changes |
|---|---|---|
| 1.0 | [Current] | Initial comprehensive guide |
Disclaimer: This document is for educational purposes. Options trading involves substantial risk. Past performance does not guarantee future results. Always paper trade before risking real capital and ensure you fully understand the risks involved.
End of Document