more important that the stock remains rangebound.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—Below the current stock price.
■
Middle Strike—As close to ATM (or where you think the stock will be atexpiration) as possible.
■
Higher Strike—The same distance above the middle strike as the lower isbelow it; use online tools to find the optimum yields and breakeven points atand before expiration.
■
Expiration—Preferably one month or less, but there is a trade-off between timeand profit potential. Use the same expiration for all legs.
5.5.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference between adjacent strikes  net debit]
■
Breakeven Down
[Lower strike  net debit]
■
Breakeven Up
[Higher strike  net debit]
195
196
The Bible of Options Strategies
5.5.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is profitable, with maximumreward occurring atthe middle strikeprice.
Risk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable andunhelpful when it isunprofitable.
DeltaDelta (speed) is at itsgreatest around theouter strikes and iszero around themiddle strike.
Delta
Vega
VegaVolatility is generallyunhelpful to the position unless it thestock moves outsidethe outer strikes.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock price islower and vice versa.
GammaGamma (acceleration)peaks inverselyaround the middlestrike, highlightingthe position’s majorturning point andmiddle Delta neutralpoint, and peaks positively around theoutside strikes.
5.5.5 Advantages and DisadvantagesAdvantages■
Profit from a rangebound stock for very little cost.
■
Capped and low risk.
■
Comparatively high risk/reward ratio if the stock remains rangebound.
Disadvantages■
The higher profit potential comes with a narrow range between the wingstrikes.
■
The higher profit potential only comes nearer expiration.
■
Bid/Ask Spread can adversely affect the quality of the trade.
Sideways Strategies
5.5.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying backthe options you sold and selling the options you bought in the firstplace.
■
Advanced traders may leg up and down or only partially unravel thespread as the underlying asset fluctuates up and down. In this way, thetrader will be taking smaller incremental profits before the expiration ofthe trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-legand create alternative risk profiles.
5.5.7 ExampleABCD is trading at $50.00 on May 17, 2004.Buy the June 2004 45 strike put for $0.98.Sell two June 2004 50 strike puts at $2.91.Buy the June 2004 55 strike put for $6.12.
Net Debit
Premiums bought  premiums sold$0.98  $6.12  $5.82  $1.28
Maximum Risk
Net debit$1.28
Maximum Reward
Difference in adjacent strikes  net debit$5.00  $1.28  $3.72
Breakeven Down
Lower strike  net debit$45.00  $1.28  $46.28
Breakeven Up
Higher strike  net debit$55.00  $1.28  $53.72
Max ROI
290.63% if the stock is priced at $50.00 at expiration.
197
198
The Bible of Options Strategies
5.6 Long Call CondorProficiency
Direction
Volatility
Asset Legs
Max Risk

Max Reward
Strategy Type
Capped
Capital Gain
!
Advanced
Neutral
Low
■ Long Call
Capped
■ Short Call■ Short Call■ Long Call
5.6.1 DescriptionLong condors are identical to long butterflies, with the exception that the two middle bought options have different strikes. The Long Call Condor is another rangebound strategy and is the opposite of a Short Call Condor, which is a volatility strategy. Long condors are quite popular because they offer a good risk/reward ratio,together with low cost. The long options at the outside strikes ensure that the risk iscapped on both sides, and this is a much more conservative strategy than the ShortStrangle.The Long Call Condor involves a low strike long call, a lower middle ITM shortcall, a higher middle OTM short call, and a higher OTM long call. The resulting position is profitable in the event of the stock remaining rangebound. Here therisk/reward ratio is attractive, and the profitable area of the risk profile is widerthan that of the Long Butterfly.
Buy lowerstrike call
Sell middlestrike call
Sell middlestrike call
Buy higherstrike call
Steps to Trading a Long Call Condor1. Buy one lower strike (ITM) call.2. Sell one lower middle strike (ITM) call.3. Sell one higher middle strike (OTM) call.4. Buy one higher strike (OTM) call.■
All options share the same expiration date for this strategy.
■
For this strategy, you must use all calls.
Long CallCondor
Sideways Strategies■
Remember that there should be equal distance between each strike price.The maximum reward occurs if the stock is at the middle strike atexpiration.
Steps In■
Try to ensure that the trend is rangebound and identify clear areas ofsupport and resistance.
■
Try to ensure that no news is coming out soon for the stock.
Steps Out■
Manage your position according to the rules defined in your TradingPlan.
■
If the stock veers outside your stop loss areas above or below the stockprice, then unravel the entire position.
■
You can unravel the position just before expiration—remember to includeall the commissions in your calculations.
5.6.2 ContextOutlook■
With long condors, your profile is direction neutral—you expect very littlemovement in the stock price.
Rationale■
With long condors, you are looking to execute a potentially high-yielding tradeat very low cost, where your maximum profits occur if the stock finishesbetween the middle strike prices at expiration.
■
You are anticipating very low volatility in the stock price.
Net Position■
This is a net debit trade, although the net cost is typically low.
■
Your maximum risk is the net debit of the bought and sold options. Your maximum reward is the difference between adjacent strike prices less the net debit.(Remember that all strike prices are equidistant to each other.)
Effect of Time Decay■
Time decay is helpful to this position when it is profitable and harmful whenthe position is unprofitable. When you enter the trade, typically the stock price
199
200
The Bible of Options Strategies
will be in the profitable area of the risk profile, so from that perspective, timedecay harms the position.
Appropriate Time Period to Trade■
One month or less.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is rangebound and identify clear areas of supportand resistance.
■
Select a stock price range you feel comfortable with. Some traders look toavoid stocks under $20.00, claiming the need for adequate wingspan betweenthe breakeven points for the best chance of success. Ultimately, it’s moreimportant that the stock remains rangebound.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—At least two strikes below the current stock price.
■
Lower Middle Strike—At least one strike below the current stock price.
■
Higher Middle Strike—At least one strike above the current stock price.
■
Higher Strike—At least two strikes above the current stock price.
■
Expiration—Preferably one month or less, but there is a trade-off between timeand profit potential. Use the same expiration for all legs.
5.6.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference between adjacent strikes  net debit]
■
Breakeven Down
[Lower strike  net debit]
■
Breakeven Up
[Higher strike  net debit]
Sideways Strategies
5.6.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is profitable, with maximumreward occurringbetween middlestrike prices.
Risk Profile
Theta
DeltaDelta (speed) is at itsgreatest around theouter strikes and iszero between themiddle strikes.
Delta
Vega
GammaGamma (acceleration)peaks inverselybetween the middlestrikes and peakspositively around theoutside strikes.
Gamma
Rho
ThetaTime decay is helpfulto the position whenit is profitable andunhelpful when it isunprofitable.
VegaVolatility is generallyunhelpful to the position unless it thestock moves outsidethe outer strikes.
RhoHigher interest ratesare generally helpfulto the position whenthe stock price islower and vice versa.
5.6.5 Advantages and DisadvantagesAdvantages■
Profit from a rangebound stock for very little cost.
■
Capped and low risk.
■
Comparatively high risk/reward ratio if the stock remains rangebound.
Disadvantages■
The higher profit potential comes with a narrow range between the wingstrikes.
■
The higher profit potential only comes nearer expiration.
■
Bid/Ask Spread can adversely affect the quality of the trade.
201
202
The Bible of Options Strategies
5.6.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back theoptions you sold and selling the options you bought in the first place.
■
Advanced traders may leg up and down or only partially unravel thespread as the underlying asset fluctuates up and down. In this way, thetrader will be taking smaller incremental profits before the expiration ofthe trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-legand create alternative risk profiles.
5.6.7 ExampleABCD is trading at $52.87 on May 17, 2004.Buy the June 2004 45 strike call for $8.52.Sell the June 2004 50 strike call at $4.82.Sell the June 2004 55 strike call at $2.34.Buy the June 2004 60 strike call for $0.98.
Net Debit
Premiums bought  premiums sold$8.52  $0.98  $4.82  $2.34  $2.34
Maximum Risk
Net debit$2.34
Maximum Reward
Difference in adjacent strikes  net debit$5.00  $2.34  $2.66
Breakeven Down
Lower strike  net debit$45.00  $2.34  $47.34
Breakeven Up
Higher strike  net debit$60.00  $2.34  $57.66
Max ROI
113.68% if the stock is between $50.00 and $55.00at expiration.
Sideways Strategies
5.7 Long Put CondorProficiency
Direction
Volatility
Asset Legs
Max Risk

Max Reward
Strategy Type
Capped
Capital Gain
!
Advanced
Neutral
Low
■ Long Put
Capped
■ Short Put■ Short Put■ Long Put
5.7.1 DescriptionThe Long Put Condor is another rangebound strategy and is the opposite of a ShortPut Condor, which is a volatility strategy. Long condors are quite popular becausethey offer a good risk/reward ratio, together with low cost. The long options at theoutside strikes ensure that the risk is capped on both sides, and this is a much moreconservative strategy than the Short Strangle.The Long Put Condor involves a low strike long put, a lower middle OTM ShortPut, a higher middle ITM Short Put, and a higher ITM Long Put. The resulting position yields a position that is profitable in the event of the stock remaining rangebound. Here the risk/reward ratio is attractive, and the profitable area of the riskprofile is wider than that of the Long Butterfly.
Buy lowerstrike put
Sell middlestrike put
Sell middlestrike put
Buy higherstrike put
Steps to Trading a Long Put Condor1. Buy one lower strike (OTM) put.2. Sell one lower middle strike (OTM) put.3. Sell one higher middle strike (ITM) put.4. Buy one higher strike (ITM) put.■
All options share the same expiration date for this strategy.
■
For this strategy, you must use all puts.
Long PutCondor
203
204
The Bible of Options Strategies■
Remember that there should be equal distance between each strike price.The maximum reward occurs if the stock is at the middle strike atexpiration.
Steps In■
Try to ensure that the trend is rangebound and identify clear areas ofsupport and resistance.
■
Try to ensure that no news is coming out soon for the stock.
Steps Out■
Manage your position according to the rules defined in your TradingPlan.
■
If the stock veers outside your stop loss areas above or below the stockprice, then unravel the entire position.
■
You can unravel the position just before expiration—remember to includeall the commissions in your calculations.
5.7.2 ContextOutlook■
With long condors, your profile is direction neutral—you expect very littlemovement in the stock price.
Rationale■
With long condors, you are looking to execute a potentially high-yielding tradeat very low cost, where your maximum profits occur if the stock finishesbetween the middle strike prices at expiration.
■
You are anticipating very low volatility in the stock price.
Net Position■
This is a net debit trade, although the net cost is typically low.
■
Your maximum risk is the net debit of the bought and sold options. Your maximum reward is the difference between adjacent strike prices less the net debit.(Remember that all strike prices are equidistant to each other.)
Sideways Strategies
Effect of Time Decay■
Time decay is helpful to this position when it is profitable and harmful whenthe position is unprofitable. When you enter the trade, typically the stock pricewill be in the profitable area of the risk profile, so from that perspective, timedecay harms the position.
Appropriate Time Period to Trade■
One month or less.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is rangebound and identify clear areas of supportand resistance.
■
Select a stock price range you feel comfortable with. Some traders look toavoid stocks under $20.00, claiming the need for adequate wingspan betweenthe breakeven points for the best chance of success. Ultimately it’s more important that the stock remains rangebound.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—At least two strikes below the current stock price.
■
Lower Middle Strike—At least one strike below the current stock price.
■
Higher Middle Strike—At least one strike above the current stock price.
■
Higher Strike—At least two strikes above the current stock price.
■
Expiration—Preferably one month or less, but there is a trade-off between timeand profit potential. Use the same expiration for all legs.
5.7.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference between adjacent strikes  net debit]
■
Breakeven Down
[Lower strike  net debit]
■
Breakeven Up
[Higher strike  net debit]
205
206
The Bible of Options Strategies
5.7.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is profitable, with maximumreward occurringbetween middlestrike prices.
Risk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable andunhelpful when it isunprofitable.
DeltaDelta (speed) is at itsgreatest around theouter strikes and iszero between themiddle strikes.
Delta
Vega
VegaVolatility is generallyunhelpful to the position unless it thestock moves outsidethe outer strikes.
GammaGamma (acceleration)peaks inverselybetween the middlestrikes and peakspositively around theoutside strikes.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock price islower and vice versa.
5.7.5 Advantages and DisadvantagesAdvantages■
Profit from a rangebound stock for very little cost.
■
Capped and low risk.
■
Comparatively high risk/reward ratio if the stock remains rangebound.
Disadvantages■
The higher profit potential comes with a narrow range between the wing strikes.
■
The higher profit potential only comes nearer expiration.
■
Bid/Ask Spread can adversely affect the quality of the trade.
Sideways Strategies
5.7.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying backthe options you sold and selling the options you bought in the firstplace.
■
Advanced traders may leg up and down or only partially unravel thespread as the underlying asset fluctuates up and down. In this way, thetrader will be taking smaller incremental profits before the expirationof the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-legand create alternative risk profiles.
5.7.7 ExampleABCD is trading at $52.87 on May 17, 2004.Buy the June 2004 45 strike put for $0.51.Sell the June 2004 50 strike put at $1.80.Sell the June 2004 55 strike put at $4.30.Buy the June 2004 60 strike put for $7.92.
Net Debit
Premiums bought  premiums sold$0.51  $7.92  $1.80  $4.30  $2.33
Maximum Risk
Net debit$2.33
Maximum Reward
Difference in adjacent strikes  net debit$5.00  $2.33  $2.67
Breakeven Down
Lower strike  net debit$45.00  $2.33  $47.33
Breakeven Up
Higher strike  net debit$60.00  $2.33  $57.67
Max ROI
114.59% if the stock is between $50.00 and $55.00 atexpiration.
207
208
The Bible of Options Strategies
5.8 Modified Call ButterflyProficiency
Direction
Volatility
Asset Legs
Max Risk

Max Reward
Strategy Type
Capped
Capital Gain
!
Expert
Bullish
Low
■ Long Call
Capped
■ Two Short Calls■ Long Call
5.8.1 DescriptionThe Modified Call Butterfly is identical to the Long Call Butterfly with the exceptionthat the distance between the middle and higher strike calls is closer than that of thelower and middle strikes.The net effect of this is that the position changes to a rangebound strategy with abullish bias. As such, we make our biggest profits if the stock remains around themiddle strike, but we can still make a profit if the stock breaks to the upside.This is a fiddly strategy and should only be used if you have an analyzer handy;otherwise, it would be easy to miscalculate your risk profile. But in terms of its usefulness, the Modified Butterfly is extremely useful for butterfly enthusiasts whoneed some flexibility.The Modified Call Butterfly involves a low strike long call, two ATM short calls,and an OTM long call. The resulting position is profitable in the event of rangeboundor rising action by the stock. Although the risk/reward ratio is attractive, the problem remains that the maximum reward is restricted to the scenario where the stockis at the middle strike at expiration.
Buy lowerstrike call
Sell middlestrike call
Sell middlestrike call
Buy higherstrike call
Modified CallButterfly
Steps to Trading a Modified Call Butterfly1. Buy one lower strike (ITM) call.2. Sell two middle strike (ATM) calls.3. Buy one higher strike (OTM) call.■
All options share the same expiration date for this strategy.
■
For this strategy, you must use all calls.
■
Remember that the distance between the higher and middle strikes is closerthan the distance between the lower and middle strikes. The maximumreward occurs if the stock is at the middle strike at expiration.
Sideways Strategies
Steps In■
Try to ensure that the trend is rangebound and identify a clear area of support.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock falls below your stop loss below the current stock price, thenunravel the entire position.
■
You can unravel the position just before expiration—remember to includeall the commissions in your calculations.
5.8.2 ContextOutlook■
With modified butterflies, your profile is direction neutral to moderatelybullish—you expect a moderate rise.
Rationale■
With modified butterflies, you are looking to execute a potentially highyielding trade at very low cost, where your maximum profits occur if thestock finishes at the middle strike price at expiration.
■
You are anticipating moderately low volatility in the stock price.
Net Position■
This is a net debit trade.
■
Your maximum risk is the net debit of the bought and sold options. Your maximum reward is the difference between the lower and middle strikes less thenet debit.
Effect of Time Decay■
Time decay is helpful to this position when it is profitable and harmful whenthe position is unprofitable. When you enter the trade, typically the stock pricewill be in the profitable area of the risk profile, so from that perspective, timedecay harms the position.
Appropriate Time Period to Trade■
One month or less.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is rangebound and identify a clear area of support.
209
210
The Bible of Options Strategies
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—Below the current stock price.
■
Middle Strike—As close to ATM as possible.
■
Higher Strike—Closer to the middle strike than the lower is below it; use onlinetools to find the optimum yields and breakeven points at and before expiration.
■
Expiration—Preferably one month or less, but there is a trade-off between timeand profit potential. Use the same expiration for all legs.
5.8.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference between lower and middle strikes  net debit]
■
Breakeven
[Lower strike  net debit]
5.8.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is profitable, with maximumreward occurring atthe middle strikeprice.
Risk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable andunhelpful when it isunprofitable.
DeltaDelta (speed) peakspositively around thelower strike andinversely around theupper strike.
Delta
Vega
VegaVolatility is generallyunhelpful to the position unless it thestock moves outsidethe outer strikes.
GammaGamma (acceleration)peaks positively asthe risk profile beginsto climb into a profitable position andpeaks inverselyaround the upperstrike.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock price islower and vice versa.
Sideways Strategies
5.8.5 Advantages and DisadvantagesAdvantages■
Profit from a sideways or rising stock for very little cost.
■
Capped and low risk.
■
Comparatively high risk/reward ratio if the stock remains rangebound.
Disadvantages■
The higher profit potential comes with a narrow range between the wingstrikes.
■
The higher profit potential only comes nearer expiration.
■
Bid/Ask Spread can adversely affect the quality of the trade.
5.8.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back theoptions you sold and selling the options you bought in the first place.
■
Advanced traders may leg up and down or only partially unravel thespread as the underlying asset fluctuates up and down. In this way, thetrader will be taking smaller incremental profits before the expiration ofthe trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-legand create alternative risk profiles.
5.8.7 ExampleABCD is trading at $50.00 on May 17, 2004.Buy the June 2004 45 strike call for $6.12.Sell two June 2004 55 strike calls at $1.30.Buy the June 2004 60 strike call for $0.50.
211
212
The Bible of Options Strategies
Net Debit
Premiums bought  premiums sold$6.12  $0.50  $2.60  $4.02
Maximum Risk
Net debit$4.02
Maximum Reward
Middle strike  lower strike strikes  net debit$55.00  $45.00  $4.02  $5.98
Interim Risk / Reward
(Higher strike  middle strike)  (middle strike  lowerstrike)  net debit$10.00  $5.00  $4.02  $0.98 (reward)
Breakeven Down
Lower strike  net debit$45.00  $4.02  $49.02
Breakeven Up
N/A here.
Max ROI
148.76% if the stock is priced at $55.00 at expiration.
Interim ROI
24.38% if the stock is priced above $60.00 at expiration.
It’s possible to have two breakevens with the Modified Butterfly, although it’s infinitely preferable to structure the trade so that there is no upper breakeven at all.After all, this is a neutral to bullish strategy, and it wouldn’t make sense for us to losemoney if the stock breaks the way we anticipated, even if we are still cautious aboutthe amount it could move.
5.9 Modified Put ButterflyProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Capped
Capital Gain
!
Expert
Bullish
Low
■ Long Put
Capped
■ Two Short Puts■ Long Put
5.9.1 DescriptionThe Modified Put Butterfly is identical to the Long Put Butterfly with the exceptionthat the distance between the middle and higher strike calls is closer than that of thelower and middle strikes. The Modified Put Butterfly is virtually identical to theModified Call Butterfly.The net effect of this is that the position changes to a rangebound strategy with abullish bias. As such, we make our biggest profits if the stock remains around themiddle strike, but we can still make a profit if the stock breaks to the upside.This is a fiddly strategy and should only be used if you have an analyzer handy;otherwise, it would be easy to miscalculate your risk profile. But in terms of its
Sideways Strategies
usefulness, the Modified Butterfly is extremely useful for butterfly enthusiasts whoneed some flexibility.The Modified Put Butterfly involves a low strike long put, two ATM short puts,and an OTM long put. The resulting position is profitable in the event of rangeboundor rising action by the stock. Although the risk/reward ratio is attractive, the problem remains that the maximum reward is restricted to the scenario where the stockis at the middle strike at expiration.
Buy lowerstrike put
Sell middlestrike put
Sell middlestrike put
Buy higherstrike put
Modified PutButterfly
Steps to Trading a Modified Put Butterfly1. Buy one lower strike (OTM) put.2. Sell two middle strike (ATM) puts.3. Buy one higher strike (ITM) put.■
All options share the same expiration date for this strategy.
■
For this strategy, you must use all puts.
■
Remember that the distance between the higher and middle strikes is closerthan the distance between the lower and middle strikes. The maximumreward occurs if the stock is at the middle strike at expiration.
Steps In■
Choose from stocks with adequate liquidity, preferably over 500,000Average Daily Volume (ADV).
■
Try to ensure that the trend is rangebound and identify a clear area ofsupport.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock falls below your stop loss below the current stock price, thenunravel the entire position.
■
You can unravel the position just before expiration—remember to includeall the commissions in your calculations.
5.9.2 ContextOutlook■
With modified butterflies, your profile is direction neutral to moderatelybullish—you expect a moderate rise.
213
214
The Bible of Options Strategies
Rationale■
With modified butterflies, you are looking to execute a potentially highyielding trade at very low cost, where your maximum profits occur if thestock finishes at the middle strike price at expiration.
■
You are anticipating moderately low volatility in the stock price.
Net Position■
You should aim to create a net credit trade, though this is not always the case.
■
Your maximum risk is the [difference between the lowest and middle strikes]less the [difference between the middle and highest strikes], [plus net debit] or[minus net credit]. Your maximum reward is the [difference between the middle