the entire position)and wait for a retracement to profit from the put.
■
If the stock thrusts down, sell the put (making a profit for the entire position) and wait for a retracement to profit from the calls.
■
Try to avoid holding into the last month; otherwise, you’ll be exposed toserious time decay.
4.4.2 ContextOutlook■
With straps, your outlook is neutral to bullish. You are looking for increasingvolatility with the stock price moving explosively in either direction, preferably to the upside.
Rationale■
To execute a neutral to bullish trade for a capital gain while expecting a surgein volatility to the upside. Ideally you are looking for a scenario where ImpliedVolatility is currently very low, giving you low option prices, but the stock isabout to make an explosive move—you don’t know which direction, but youhave a bias toward the upside.
Net Position■
This is a net debit transaction because you have bought calls and puts.
■
Your maximum risk on the trade itself is limited to the net debit of the boughtcalls and puts. Your maximum reward is potentially unlimited.
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Effect of Time Decay■
Time decay is harmful to the Strap. Never keep a Strap into the last month toexpiration because this is when time decay accelerates the fastest.
Appropriate Time Period to Trade■
We want to combine safety with prudence on cost. Therefore, the optimumtime period to trade straps is with three months until expiration, but if thestock has not moved decisively, sell your position when there is one month toexpiration. Never hold a Strap into the last month.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Actively seek chart patterns that appear like pennant formations, signifying aconsolidating price pattern, preferably within an upward trend.
■
Try to concentrate on stocks with news events and earnings reports about tohappen within two weeks.
■
Choose a stock price range you feel comfortable with.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Strike—ATM for the put and calls.
■
Expiration—Preferably around three months. Use the same expiration date forboth legs.
4.4.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Uncapped]
■
Breakeven Down
[Strike  net debit]
■
Breakeven Up
[Strike  half the net debit]
Volatility Strategies
4.4.4 Greeks
Risk ProfileIf the stock priceremains around thestrike price, we makeour maximum loss. Ifit moves explosivelyin either direction, wemake profits, particularly if the stockmoves up.
Key:ExpirationToday – 3 monthsTime(t) – 1 month
DeltaDelta (speed) is at itsgreatest when theposition is makingmoney in either direction. The negativeDelta is purely an indication of direction;i.e., making profit asthe stock falls.
Risk Profile
Theta
ThetaTime decay is mostharmful when theposition is unprofitable.
Delta
Vega
VegaVolatility is helpful tothe position, particularly at the strikeprice where the stockhasn’t yet moved.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock rises andvice versa.
GammaGamma (acceleration)peaks around thestrike price, illustrating the position’sturning point and thefastest rate of change.
4.4.5 Advantages and DisadvantagesAdvantages■
Profit from a volatile stock moving in either direction.
■
Capped risk.
■
Uncapped profit potential if the stock moves.
Disadvantages■
Expensive—you have to buy the ATM calls and put.
■
Significant movement of the stock and option prices is required to make aprofit.
■
Bid/Ask Spread can adversely affect the quality of the trade.
■
Psychologically demanding strategy.
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4.4.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by selling your calls andputs.
■
You can also exit only your profitable side of the trade and hope that the stockmoves to favor the unprofitable side later on. For example, if the share hasmoved decisively upwards, thus making the calls profitable, you will sell thecalls and make a profit on the entire trade, but you will be left with almostvalueless puts. Having now sold the calls, you will hope that the stock mayretrace upwards and enhance the value of the puts you are still holding, whichyou can then sell.
Mitigating a Loss■
Sell the position if you have only one month left to expiration. Do not hold on,hoping for the best, because you risk losing your entire stake.
4.4.7 ExampleABCD is trading at $25.37 on May 17, 2004.Buy the August 2004 25 strike put at $1.70.Buy two August 2004 25 strike calls for $2.40.Net Debit
Premiums bought$1.70  $4.80  $6.50
Maximum Risk
Net debit$6.50
Maximum Reward
Uncapped
Breakeven Down
Strike  net debit$25.00  $6.50  $18.50
Breakeven Up
Strike  (net debit / 2)$25.00  $3.25  $28.25
We can see that if we held on to expiration, our breakevens would be $18.50 and$28.25, respectively. In other words, the stock would have to fall to below $18.50 orrise above $28.25 in order for us to make a profit. In reality, we don’t hold on untilexpiration, and therefore because both options will still contain some time valuebefore that final month, our breakevens will be slightly more narrow, which ofcourse helps us.
Volatility Strategies
In the previous example, we’ve assumed that the rules required to make aStraddle have been passed in order for us to contemplate the Strap!
4.5 GutsProficiency
Direction
Volatility
Asset Legs
Expert
Neutral
High
Max Risk
Max Reward
Strategy Type
Uncapped
Capital Gain
!
■ Long Call
Capped
■ Long Put
4.5.1 DescriptionThe Guts is a simple adjustment to the Strangle, but this adjustment makes it moreexpensive. Instead of buying OTM options, we buy ITM calls and puts, which creates a higher cost basis. As with the Strangle, the risk we run with a Guts is that thebreakevens can be pushed further apart than with a Straddle.To even contemplate a Guts, the Straddle criteria must have been satisfied first.We buy higher strike puts and lower strike calls with the same expiration date sothat we can profit from the stock soaring up or plummeting down. As with theStrangle, each leg of the trade has limited downside (i.e., the call or put premium)but uncapped upside.Again the same challenges apply regarding Bid/Ask Spreads and the psychologyof the actual trade. Remember that time decay hurts long options positions becauseoptions are like wasting assets. The closer we get to expiration, the less time valuethere is in the option.Use the Straddle rules but then make an adjustment for the Guts:1. Instead of trading the ATM calls and puts, choose the next strike higher for theput and the next strike lower for the call.2. Now compare the breakeven scenarios for the Guts to the Straddle. Typicallythe Guts’ breakevens will be slightly wider. The Guts isn’t very attractive whencompared to the Strangle, but you can always compare the two with theStraddle, using the Analyzer.Again, it’s important to follow the entry and exit rules, and psychologically speaking, it’s another tough strategy to play after you’re in. It’s very easy to find reasonsto exit, even though it’s in breach of your Trading Plan. But you must remember thatyou got in for a certain reason (or reasons), and you must stay in until one of yourother reasons compels you to exit.
Buy ITM call
Buy ITM put
Guts
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Steps to Trading a Guts1. Buy ITM (lower) strike calls, preferably with about three months to expiration.2. Buy ITM (higher) strike puts with the same expiration.Steps In■
Actively seek chart patterns that appear like pennant formations, signifyinga consolidating price pattern.
■
Try to concentrate on stocks with news events and earnings reports aboutto happen within two weeks.
■
Choose a stock price range you feel comfortable with. For some traders,that’s between $20.00 and $60.00.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
Exit either a few days after the news event occurs where there is nomovement or after the news event where there has been profitablemovement.
■
If the stock thrusts up, sell the call (making a profit for the entire position)and wait for a retracement to profit from the put.
■
If the stock thrusts down, sell the put (making a profit for the entire position) and wait for a retracement to profit from the call.
■
Try to avoid holding into the last month; otherwise, you’ll be exposed toserious time decay.
4.5.2 ContextOutlook■
With Guts, your outlook is direction neutral. You are looking for increasingvolatility with the stock price moving explosively in either direction.
Rationale■
To execute a neutral trade for a capital gain whilst expecting a surge in volatility. Ideally you are looking for a scenario where Implied Volatility is currentlyvery low, giving you low option prices, but the stock is about to make anexplosive move—you just don’t know which direction.
■
Guts are more expensive than Strangles because you are buying ITM optionson both sides, as opposed to buying OTM options. Generally, a Guts isprohibitively expensive, and it would be better to carry out a long Strangleinstead.
Volatility Strategies
Net Position■
This is a net debit transaction because you have bought calls and puts.
■
Your maximum risk on the trade itself is limited to the net debit of the boughtcalls and puts less the difference between the strikes. Your maximum reward ispotentially unlimited.
Effect of Time Decay■
Time decay is harmful to the Guts. Never keep a Guts into the last month toexpiration because this is when time decay accelerates the fastest.
Appropriate Time Period to Trade■
We want to combine safety with prudence on cost. Therefore the optimumtime period to trade Guts is with three months until expiration, but if the stockhas not moved decisively, sell your position when there is one month to expiration. Never hold a Strangle into the last month.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Actively seek chart patterns that appear like pennant formations, signifying aconsolidating price pattern that may be about to explode.
■
Try to concentrate on stocks with news events and earnings reports about tohappen within two weeks.
■
Choose a stock price range you feel comfortable with.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Call Strike—ITM—below the current stock price.
■
Put Strike—ITM—above the current stock price.
■
Expiration—Preferably around three months. Use the same expiration date forboth legs.
4.5.3 Risk Profile■
Maximum Risk
[Net debit paid]  [Difference between strikes]
■
Maximum Reward
[Uncapped]
■
Breakeven Down
Lower strike  [Net debit  difference between strikes]
■
Breakeven Up
[Higher strike]  [Net debit  difference between strikes]
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4.5.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileIf the stock priceremains between thestrike prices, we makeour maximum loss. Ifit moves explosivelyin either direction, wemake profits.
Risk Profile
Theta
ThetaTime decay is mostharmful when theposition is unprofitable.
DeltaDelta (speed) is at itsgreatest when theposition is makingmoney in either direction. The negativeDelta is purely an indication of direction;i.e., making profit asthe stock falls.
Delta
Vega
VegaVolatility is helpful tothe position particularly between thestrike prices.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock rises andvice versa.
GammaGamma (acceleration)peaks between thestrike prices, illustrating the position’sturning point and thefastest rate of change.
4.5.5 Advantages and DisadvantagesAdvantages■
Profit from a volatile stock moving in either direction.
■
Capped risk.
■
Uncapped profit potential if the stock moves.
Disadvantages■
Significant movement of the stock and option prices is required to make aprofit.
■
Very expensive due to both options being ITM.
Volatility Strategies■
Bid/Ask Spread can adversely affect the quality of the trade.
■
Psychologically demanding strategy.
4.5.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by selling your calls andputs.
■
You can also exit only your profitable leg of the trade and hope that the stockretraces to favor the unprofitable side later on. For example, if the share hasmoved decisively upwards, thus making the call profitable, you will sell thecalls and make a profit on the entire trade, but you will be left with almostvalueless puts. Having now sold the calls, you will hope that the stock mayretrace and enhance the value of the puts you are still holding, which you canthen sell.
Mitigating a Loss■
Sell the position if you have only one month left to expiration. Do not hold on,hoping for the best, because you risk losing your entire stake.
4.5.7 ExampleABCD is trading at $25.37 on May 17, 2004.Buy the August 2004 $22.50 strike call for $4.20.Buy the August 2004 $27.50 strike put for $3.80.Net Debit
Premiums bought$4.20  $3.80  $8.00
Maximum Risk
Net debit  difference in premiums$8.00  $5.00  $3.00
Maximum Reward
Uncapped
Breakeven Down
Lower strike  maximum risk$22.50  $3.00  $19.50
Breakeven Up
Higher strike  maximum risk$27.50  $3.00  $30.50
It’s very rare to even contemplate doing a Guts instead of a Strangle because the costbasis is too high.
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4.6 Short Call ButterflyProficiency
Direction Volatility
Asset Legs
Max Risk Max Reward Strategy Type

!
Intermediate Neutral
High
■ Short Call
Capped
Capped
Capital Gain
■ Two Long Calls■ Short Call
4.6.1 DescriptionThe Short Call Butterfly is another volatility strategy and is the opposite of a LongCall Butterfly, which is a rangebound strategy. The reason that short butterfliesaren’t particularly popular is because even though they produce a net credit, theyoffer very small returns compared to straddles and strangles with only slightly lessrisk.The Short Call Butterfly involves a low strike short call, two ATM long calls, andan OTM short call. The resulting position is profitable in the event of a big move bythe stock. The problem is that the reward is seriously capped and is typicallydwarfed by the potential risk if the stock fails to move.
Sell lowerstrike call
Buy middlestrike call
Buy middlestrike call
Sell higherstrike call
Short CallButterfly
Steps to Trading a Short Call Butterfly1. Sell one lower strike (ITM) call.2. Buy two middle strike (ATM) calls.3. Sell 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 there should be equal distance between each strike price.The maximum risk occurs if the stock is at the middle strike at expiration.
Steps In■
Actively seek chart patterns that appear like pennant formations, signifyinga consolidating price pattern.
Volatility Strategies
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
You can unravel the position just before expiration—remember to include allthe commissions in your calculations.
4.6.2 ContextOutlook■
With short butterflies, your outlook is direction neutral. You are looking forlarge volatility in the stock price, but you are not concerned with the direction.
Rationale■
With short butterflies, you are looking to execute a limited yielding trade at anet credit whereby your maximum profits occur if the stock finishes on eitherside of the upper and lower strike prices at expiration.
■
You are anticipating high volatility with the stock price, which will lead you toprofit.
Net Position■
This is a net credit trade.
■
Your maximum risk is the difference between the adjacent strike prices less thenet credit. (Remember that the upper and lower strike prices are equidistant tothe middle strike price.) Your maximum reward is the net credit you receive.
Effect of Time Decay■
Time decay is generally harmful to your trade here because you are looking fora lot of movement in the stock price. After the position has become profitable,time decay becomes helpful.
Appropriate Time Period to Trade■
At least three months out.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Actively seek chart patterns that appear like pennant formations, signifying aconsolidating price pattern that may be about to explode.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
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Lower Strike—Below the current stock price.
■
Middle Strike—As close to ATM (or where you think the stock will not 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 three months or more, but there is a trade-off betweentime, cost/net credit, and profit potential. Use the same expiration date for all legs.
4.6.3 Risk Profile■
Maximum Risk
[Difference in adjacent strikes  net credit]
■
Maximum Reward
[Net credit received]
■
Breakeven Down
[Lower strike  net credit]
■
Breakeven Up
[Higher strike  net credit]
4.6.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is lossmaking, with maximum loss 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 generallyhelpful to the position unless it thestock moves outsidethe outer strikes.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock price ishigher and vice versa.
GammaGamma (acceleration)peaks positivelyaround the middlestrike, highlightingthe position’s majorturning point andmiddle Delta neutralpoint, and peaksinversely around theoutside strikes.
Volatility Strategies
4.6.5 Advantages and DisadvantagesAdvantages■
Profit from a rangebound stock with no capital outlay.
■
Capped risk.
■
Comparatively high profit probability if the stock moves explosively.
Disadvantages■
The higher profit potential comes with a wider range between the strikes.
■
The higher profit potential only comes nearer expiration.
■
The potential loss is far greater than the amount by which you can profit.
■
Bid/Ask Spread can adversely affect the quality of the trade.
4.6.6 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.
4.6.7 ExampleABCD is trading at $50.00 on May 17, 2004.Sell the August 2004 45 strike call for $7.98.Buy two August 2004 50 strike calls at $5.28.Sell the August 2004 55 strike call for $3.35.
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Net Credit
Premiums sold  premiums bought$7.98  $3.35  $10.56  $0.77
Maximum Risk
Difference in adjacent strikes  net credit$5.00  $0.77  $4.23
Maximum Reward
Net credit$0.77
Breakeven Down
Lower strike  net credit$45.00  $0.77  $45.77
Breakeven Up
Higher strike  net credit$55.00  $0.77  $54.23
Max ROI
18.20% if the stock is either below $45.00 or above$55.00 at expiration.
4.7 Short Put ButterflyProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Capped
Capital Gain
!
Intermediate
Neutral
High
■ Short Put
Capped
■ Two Long Puts■ Short Put
4.7.1 DescriptionThe Short Put Butterfly is identical to the Short Call Butterfly, except that it uses putsinstead of calls. It is the opposite of a Long Put Butterfly, which is a rangeboundstrategy. The reason that short butterflies aren’t particularly popular is because eventhough they produce a net credit, they offer very small returns compared with straddles and strangles with only slightly less risk.The Short Put Butterfly involves a low strike short put, two ATM long puts, andan ITM short put. The resulting position is profitable in the event of a big move bythe stock. The problem is that the reward is seriously capped and is typicallydwarfed by the potential risk if the stock fails to move.
Sell lowerstrike put
Buy middlestrike put
Buy middlestrike put
Sell higherstrike put
Short PutButterfly
Volatility Strategies
Steps to Trading a Short Put Butterfly1. Sell one lower strike (OTM) put.2. Buy two middle strike (ATM) puts.3. Sell 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 there should be equal distance between each strike price.The maximum risk occurs if the stock is at the middle strike at expiration.
Steps In■
Actively seek chart patterns that appear like pennant formations, signifyinga consolidating price pattern.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
You can unravel the position just before expiration—remember to includeall the commissions in your calculations.
4.7.2 ContextOutlook■
With short butterflies, your outlook is direction neutral. You are lookingfor large volatility in the stock price, but you are not concerned with thedirection.
Rationale■
With short butterflies, you are looking to execute a limited yielding trade at anet credit whereby your maximum profits occur if the stock finishes on eitherside of the upper and lower strike prices at expiration.
■
You are anticipating high volatility with the stock price, which will lead you toprofit.
Net Position■
This is a net credit trade.
■
Your maximum risk is the difference between the adjacent strike prices lessthe net credit. (Remember that the upper and lower strike prices are
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equidistant to the middle strike price.) Your maximum reward is the net credityou receive.
Effect of Time Decay■
Time decay is generally harmful to your trade here because you are looking fora lot of movement in the stock price. After the position has become profitable,time decay then becomes helpful.
Appropriate Time Period to Trade■
At least three months out.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Actively seek chart patterns that appear like pennant formations, signifying aconsolidating price pattern that may be about to explode.
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 not 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 three months or more, but there is a trade-off betweentime, cost/net credit, and profit potential. Use the same expiration date for alllegs.
4.7.3 Risk Profile■
Maximum Risk
[Difference in adjacent strikes  net credit]
■
Maximum Reward
[Net credit received]
■
Breakeven Down
[Lower strike  net credit]
■
Breakeven Up
[Higher strike  net credit]
Volatility Strategies
4.7.4 GreeksKey:ExpirationToday – 3 monthsTime(t) – 1 monthRisk ProfileAs the stock priceremains rangebound,the position is lossmaking, with maximum loss 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 generallyhelpful to the position unless it thestock moves outsidethe outer strikes.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position whenthe stock price ishigher and vice versa.
GammaGamma (acceleration)peaks positivelyaround the middlestrike, highlightingthe position’s majorturning point andmiddle Delta neutralpoint, and peaksinversely around theoutside strikes.
4.7.5 Advantages and DisadvantagesAdvantages■
Profit from a rangebound stock with no capital outlay.
■
Capped risk.
■
Comparatively high profit probability if the stock moves explosively.
Disadvantages■
The higher profit potential comes with a wider range between the strikes.
■
The higher profit potential only comes nearer expiration.
■
The potential loss is far greater than the amount by which you can profit.
■
Bid/Ask Spread can adversely affect the quality of the trade.
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4.7.6 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 the spreadas the underlying asset fluctuates up and down. In this way, the trader will betaking smaller incremental profits before the expiration of 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.
4.7.7 ExampleABCD is trading at $50.00 on May 17, 2004.Sell the August 2004 45 strike put for $2.57.Buy two August 2004 50 strike puts at $4.83.Sell the August 2004 55 strike put for $7.85.
Net Credit
Premiums sold  premiums bought$2.57  $7.85  $9.64  $0.76
Maximum Risk
Difference in adjacent strikes  net credit$5.00  $0.76  $4.24
Maximum Reward
Net credit$0.76
Breakeven Down
Lower strike  net credit$45.00  $0.76  $45.76
Breakeven Up
Higher strike  net credit$55.00  $0.76  $54.24
Max ROI
17.92% if the stock is either below $45.00 or above $55.00at expiration.
Volatility Strategies
4.8 Short Call CondorProficiency
Direction
Volatility
Asset Legs
Max Risk

Max Reward
Strategy Type
Capped
Capital Gain
!
Advanced
Neutral
High
■ Short Call
Capped
■ Long Call■ Long Call■ Short Call
4.8.1 DescriptionShort condors are identical to short butterflies, with the exception that the two middlebought options have different strikes. The Short Call Condor is another volatility strategy and is the opposite of a Long Call Condor, which is a rangebound strategy. Shortcondors aren’t particularly popular because even though they produce a net credit, theyoffer very small returns compared to straddles and strangles, with only slightly less risk.The Short Call Condor involves a low strike short call, a lower middle ITM longcall, a higher middle OTM long call, and a higher OTM short call. The resulting position yields a position that is profitable in the event of a big move by the stock. Again,the problem is that the reward is seriously capped and is typically dwarfed by thepotential risk if the stock fails to move.
Sell lowerstrike call
Buy middlestrike call
Buy middlestrike call
Sell higherstrike call
Short CallCondor
Steps to Trading a Short Call Condor1. Sell one lower strike (ITM) call.2. Buy one lower middle strike (ITM) call.3. Buy one higher middle strike (OTM) call.4. Sell one higher strike (OTM) call.■
All options share the same expiration date for this strategy.
■
For this strategy, you must use all calls