Risk Twist#
The “Free Trend” Play - Chase a breakout without paying a debit.
Overview#
| Attribute | Value |
|---|---|
| Environment | Negative Gamma (Trend) |
| Market Dynamic | Clear Breakout |
| Volatility | Any |
| Primary Goal | Funded Trend - Own a debit spread for free |
| Profit Target | 50-75% of Debit Spread width |
| Max Loss | Put Spread risk if breakout fails and reverses |
Use when a level breaks (Negative Gamma) and you want to chase the trend without paying a debit. The credit spread finances the debit spread.
Structure#
Bullish Example#
- Leg 1 (Debit - Profit Engine): Buy ATM Call / Sell OTM Call
- Leg 2 (Credit - Financing): Sell OTM Put Spread
Bearish Example#
- Leg 1 (Debit - Profit Engine): Buy ATM Put / Sell OTM Put
- Leg 2 (Credit - Financing): Sell OTM Call Spread
Entry Criteria#
- Negative Gamma environment confirmed
- Clear breakout in progress
- Target Cost: $0.00 (Scratch) or slight net credit
- Confident in trend direction
Exit Rules#
Profit Target#
- Take profit at 50-75% of the Debit Spread width
Stop Loss#
- Standard downside risk on the financing spread if breakout fails and reverses hard
Management#
The debit spread is your profit engine. The credit spread is just financing.
Risk: If the breakout fails and reverses hard, you’re exposed on the financing (credit) spread. Only use when you have conviction in the breakout direction.