Strategy Playbooks

Execution Window: 10:00 AM – 10:30 AM ET

Wait for the initial 30-minute opening range to set and for 10:00 AM economic data releases (Consumer Confidence, ISM, JOLTS) to clear.

Phase 1: Data Collection (The Audit)

1. Regime Check: Is SPX Price Above or Below the Vol Trigger (Zero Gamma Level)?
   • Above = Positive Gamma (Pinning / Mean Reversion).
   • Below = Negative Gamma (Expansion / Trending).
2. The “Vanna” Check: Are Spot Price and IV moving together or opposing?
   • Spot Down + IV Up = Fear. (Pin is weak).
   • Spot Down + IV Stable/Down = Vanna Flows. (Dealers will buy the dip -> Pin is strong).
3. Magnet Check: Where is the Absolute Gamma Strike? (Mark this level).
4. Barrier Check: Where are the large Call/Put Walls?

The Vol Dashboard Audit (Term Structure)

Use these metrics to determine if the market is in “Panic” or “Slumber.”

Phase 2: The Decision Matrix (Strategy Selection)

Phase 3: Mechanical Execution “Cheat Sheet”

1. The Iron Butterfly (The “Income” Pin)

Use this for Income Generation when VIX is high or Normal. Do not hold to the bell.

• Setup: Sell ATM Call & Put / Buy Wings (20-25 points wide).
• Target: Center at the Absolute Gamma Strike.
• Goal: 15% - 20% of Max Credit. (Take the money and run).
• Stop: 2x Credit. (If you collect $3.00, stop at a $6.00 debit).
• Management: ACTIVE. If tested, close immediately or hedge with Futures. Never “Set and Forget.”

2. The Long Butterfly (The “Lotto” Pin)

Use this when VIX - VIX1D > 5 (Deep Contango). Premiums are too cheap to sell.

• Setup: Buy 1 ITM Call / Sell 2 ATM Calls / Buy 1 OTM Call (Debit Spread).
• Target: Center exactly on the Absolute Gamma Strike.
• Goal: Hold into the close for Gamma expansion (if pinning).
• Stop: None. (Risk is defined to the Debit paid at entry).
• Management: Set and Forget.

3. The Double Diagonal (The “Vol Crush” Play)

• Setup: Sell 0 DTE ATM Straddle / Buy 30 DTE Strangle (at Expected Move).
• Goal: Capture Vega crush + Theta decay.
• Management: HARD CLOSE at EOD.
  • Do not carry the 30 DTE leg overnight (removes gap risk).
  • Use Limit Orders to exit the back-month leg to avoid slippage.

4. The Intraday Calendar (The “Time Arb” Play)

Use when 0 DTE IV is “pumped” relative to tomorrow’s IV (e.g., Pre-Event or Panic).

• Setup: Sell 0 DTE ATM Strike / Buy 1 DTE ATM Strike (Same Strike).
• Logic: You are Short 0 DTE Theta (Fast decay) and Long 1 DTE Theta (Slow decay).
• Goal: 10% - 15% on Debit Paid.
• Stop: 15% Loss on Debit Paid. (If Implied Vol collapses on both days equally, the trade loses).
• Management: Close ALL legs by 3:30 PM. Do not hold the 1 DTE leg overnight.

5. The Iron Condor (The “Base Hit” Play)

Use when the market is stable but lacking a single “Magnet.”

• Structure: Sell OTM Call Spread / Sell OTM Put Spread.
• Strike Selection: Short strikes at the Call Wall and Put Wall (or ~15 Delta).
• Goal: 25% of Max Credit. (Prioritize win rate over ROI).
• Stop: 2x Credit (Strict stop. Do not adjust tested sides).
• Management: Close winners early. Do not hold through the mid-day lull if target is hit.

6. Standard Credit Spreads (The “Fade”)

• Structure: Sell OTM Call / Buy Further OTM Call.
• Goal: 25% - 50% of Credit.
• Stop: 2x Credit.
• Management: If the short strike is touched, exit. Do not roll.

7. The 1x2 Ratio / Backspread (The “Vol Explosion”)

• Structure: Sell 1x 30 Delta / Buy 2x 15 Delta.
• Entry: Scratch ($0.00) or small Credit.
• Logic: Unlimited profit if market rips. No downside risk if market sits.
• Stop: If price “parks” inside the “Valley of Death” (Gap between Short and Long) for > 30 mins.

8. The Financed Ratio Vertical (The Trend)

Use when a level breaks (Negative Gamma) and you want to chase the trend.

• Structure (Bullish Example):
  • Leg 1 (Debit): Buy ATM Call / Sell OTM Call.
  • Leg 2 (Credit): Sell OTM Put Spread (The financing).
• Target Cost: $0.00 (Scratch) or slight Net Credit.
• Exit: Take profit at 50% of the Debit Spread width.

Phase 4: Intraday Management Rules

1. The “Gamma Hour” Hard Stop:

   • Close ALL Short Gamma positions (Iron Fly, Condor, Short Spreads, Double Diagonals, Calendars) by 3:30 PM ET.
   • Reasoning: MOC (Market On Close) flows begin at 3:40 PM. Gamma risk outweighs Theta reward in the final 30 minutes.

2. The “Emergency” Hedge (Futures):

   • If a position moves against you rapidly (e.g., news spike) and options liquidity widens:
   • Step 1: Execute an opposing market order in ES/MES Futures to neutralize Delta.
   • Step 2: Work limit orders to close the option legs.

3. The VIX Audible:

   • If VIX spikes +5% intraday, Close Short Vega trades immediately. Transition to 1x2 Ratio or Cash.

Quick Reference

1. Is it Pinning? (Positive Gamma)

• Yes, Hard Pin + Deep Contango (Spread > 5): Long Butterfly (Debit) -> Risk is defined/low.
• Yes, Hard Pin + Normal Vol: Iron Butterfly (Credit) -> Target 15% Profit.
• Yes, IV Rich: Double Diagonal -> Close All Legs EOD.
• Yes, Term Structure Steep (0DTE > 1DTE): Intraday Calendar -> Arb the decay rates.
• Yes, Wide Range: Iron Condor -> Target 25% Profit.

2. Is it Moving? (Negative Gamma)

• Yes, Explosive/Unknown: 1x2 Ratio.
• Yes, Clear Trend: Financed Ratio Vertical.
• Yes, Trend but scared of Reversal: Short BWB (Hedged Credit).