1x2 Ratio / Backspread#
The “Vol Explosion” Play - Profit if the market rips; scratch if it sits.
Overview#
| Attribute | Value |
|---|---|
| Environment | Negative Gamma (Explosion) |
| Market Dynamic | Unknown Direction |
| Volatility | Any |
| Primary Goal | Vol Explosion - Unlimited profit if market rips; scratch if flat |
| Profit Target | Unlimited (if market explodes through long strikes) |
| Max Loss | The “Valley of Death” between strikes |
This is a volatility play for Negative Gamma environments when direction is unknown. You’re betting on a big move, not a direction.
Structure#
- Sell 1x 30 Delta option
- Buy 2x 15 Delta options (same direction)
Example (Bearish explosion expected):
- Sell 1x 6000 Put (30 Delta)
- Buy 2x 5950 Puts (15 Delta)
Entry Criteria#
- Negative Gamma environment confirmed
- Direction is unknown/uncertain
- Entry at Scratch ($0.00) or small credit
- Expecting potential vol explosion
Exit Rules#
Profit Target#
- Unlimited profit if market rips through the 15 delta strikes
- No downside risk if market sits still (entered at scratch)
Stop Loss#
- If price “parks” inside the Valley of Death for > 30 minutes
- Exit to avoid max loss scenario
Management#
Monitor the “Valley of Death” - the gap between your short and long strikes. This is your max loss zone.
The Valley of Death: If price moves into this zone and stalls, you face max loss. Exit quickly if price parks here. The edge is in the explosion, not the grind.