Manual
Short BWB
A directional credit structure with tail protection for negative gamma conditions.
The “Credit Spread Alternative” - Directional credit with crash protection.
Overview
| Attribute | Value |
|---|---|
| Environment | Negative Gamma (Trend) |
| Market Dynamic | Fear of Reversal |
| Volatility | Any |
| Primary Goal | Tail Defense - Credit spread with “Crash Protection” |
| Profit Target | Keep the credit |
| Max Loss | Significantly reduced vs standard credit spread |
Structure
Short Butterfly (Sell 1 / Buy 2 / Sell 1)
This is essentially:
- Standard Credit Spread
- PLUS a Debit Spread Hedge (the “crash protection”)
Example (Bearish):
- Sell 1x 6100 Call
- Buy 2x 6110 Calls
- Sell 1x 6120 Call
Entry Criteria
- Negative Gamma environment confirmed
- Directional view but fear of reversal/tail event
- Prefer over standard credit spread when tail risk is elevated
- Enter for a net credit
Exit Rules
Profit Target
- Keep the credit if directional view is correct
Stop Loss
- Max loss is significantly reduced compared to a standard vertical spread
- The hedge kicks in on a tail event
Management
The 3-leg structure provides automatic crash protection. No manual hedging required.