📘 SMB OPTIONS PLAYBOOK

Strategy Finder Wizard • Live Payoff Calculator • Basics & Greeks + Textbook Strategies + SMB Capital Desk Rules (incl. the Rhino) • Full Worked Examples • Updated September 2026

📈 Stock Trading Playbook 📘 You Are Here: Options Trading Playbook 📖 Glossary 📋 Game Plan Template 📡 Market Internals 🚩 Red Flags Checklist

What is this page? This is for trading OPTIONS CONTRACTS (calls, puts, spreads, the Rhino) — not buying/selling shares directly. If you want the stock/share trading setups page instead, use the button above.

0. WHAT IS AN OPTION / PREMIUM

An option is a contract on 100 shares. Call = right to BUY at the strike price. Put = right to SELL at the strike price. Premium = the price you pay (buyer) or receive (seller), quoted per share — multiply by 100 for the real dollar cost.

Worked Example	The Core Lesson (SMB Capital beginner course)
Stock XYZ trades at 100. You buy the 105 Call for 3.00. Real cost: 3.00 x 100 = $300. Breakeven: 105 + 3.00 = $108.00. XYZ must close above 108 for you to profit. Below that, even if XYZ rallies to 106 or 107, you still lose money — the move did not cover the premium paid.	There are only 5 possible outcomes for an option bet: big down, small down, flat, small up, big up. The BUYER only wins in 1 of those 5 (a big enough move to cover the premium). The SELLER wins in 4 of those 5. This is why selling premium has a structurally higher win rate than buying it — but sellers can lose big on the 1 bad outcome, which is why defined-risk spreads exist.

0A. THE GREEKS — DELTA, GAMMA, THETA, VEGA

Greek	Measures	How It Works	Worked Example
Delta	Direction & probability. How much option price moves per $1 stock move. Range -1 to +1.	Long call: 0 to +1. Long put: 0 to -1. Signs flip when you sell. ATM option = always ~50 delta = roughly a coin flip. Delta doubles as rough OTM probability: 10∆≈90% OTM, 20∆≈80% OTM, 30∆≈70% OTM. Delta-neutral: longs/shorts cancel to ~zero — used by income traders (iron condors, Rhino) who want no market view, only time decay. Does NOT stay neutral on its own — see Gamma.	XYZ at 100. Buy the 105 Call, delta 0.30. XYZ up $1 to 101: option gains ~0.30 x 100 = $30 (before other Greeks). XYZ down $1 to 99: option loses ~$30. Rough read: ~30% chance of finishing in the money by expiry.
Gamma	The rate Delta itself changes. Highest exactly at-the-money; explodes near expiry.	DTE risk bands (SMB desk): 60+ DTE: gamma low/stable (~0.02) — safest, easiest to learn on. 21-30 DTE: moderately responsive — check every ~30 min. 0-7 DTE (0DTE): highly unstable, dramatic shifts — near-continuous monitoring required. Short gamma (sold options): losses ACCELERATE against you. Long gamma (bought options): gains ACCELERATE in your favour.	SPY 50-delta call, gamma 0.08. SPY up $1: delta shifts 50→58. SPY up $5 total fast: delta can swing from 50 to net -60 on a short position — a full flip from neutral to heavily directional almost instantly. This is exactly why 0DTE is dangerous.
Theta	Value lost per day from time passing alone (no price/IV change). The "melting ice cube."	Positive theta = time working FOR you (SELLER/collector). Negative theta = time working AGAINST you (BUYER). Decay is NOT linear — accelerates near expiry. OTM options: decay fastest in the 60-30 DTE window. ATM options: decay dominates hardest in the final 30-0 DTE. Insurance/casino analogy: selling = insurance company (frequent small wins, rare large losses). Buying = paying for protection (frequent small losses, rare large wins).	Sell a 10-lot iron fly, theta $845/day. Held 5 trading days, price stable: ~845 x 5 = $4,225 theta profit (before any Vega/IV change). Single contract: theta -0.05 = losing $5/day per contract with zero stock movement, if you're the buyer.
Vega	Sensitivity to Implied Volatility (IV) — price change per 1% IV move (not the stock price).	Long vega (net long options): profits when IV RISES — deploy BEFORE a known catalyst (earnings/Fed/CPI), IV usually spikes into the event. Short vega (net short/premium sellers): profits when IV FALLS — works best in stable/range-bound markets, especially right after an IV spike (IV mean-reverts, spikes are usually short-lived). The trap: never ignore vega around earnings — a 5% IV spike can erase a full day's theta profit. Contango = normal (longer-dated IV higher than short-dated). Backwardation = short-dated IV richer than long-dated (usually pre-event) — this is what calendar spreads exploit.	Position with vega +10 ($10/contract per 1% IV move). IV rises 3%: gains ~10 x 3 = $30 from Vega alone, separate from any price move.

0B. HOW THE GREEKS INTERACT WITH TIME

DTE Window	Gamma	Theta	What It Means
60+ days	Low, stable	Slow, gradual	Easiest to learn on; income desk default
21-30 days	Moderate	Accelerating (especially OTM)	Check every ~30 minutes
0-7 days (0DTE)	Extreme, explosive	Fastest (especially ATM)	Near-continuous monitoring; not for beginners

The core trade-off: Gamma and Theta trade off directly — higher theta collection (more daily income) requires accepting higher gamma exposure (more instability). You cannot have slow, safe decay AND large daily income at the same time.
Best-case combination: positive theta + short vega + stable/falling IV = paid by time AND by volatility calming down simultaneously.
Danger zone: short vega hit by a sudden IV spike — can erase a full day's (or week's) theta gain in one move, even with zero price movement.

0C. QUICK REFERENCE + RULES OF THUMB

Greek	Measures	Positive Means	Works For
Delta	Price change per $1 stock move	Bullish exposure (long calls / short puts)	Directional traders
Gamma	How fast delta changes	Accelerating gains (long options)	Option buyers near a big move
Theta	Value lost per day	Time decay working for you	Sellers / premium collectors
Vega	Price change per 1% IV move	Gaining as IV rises	Buyers before a known catalyst

Rules of thumb:
• At-the-money options are always about 50 delta.
• Gamma is highest at-the-money and explodes near expiry — this is WHY 0DTE is risky.
• Theta accelerates as expiry approaches — the option "melts" faster near the end.
• Vega and IV mean-revert — big spikes are usually short-lived.
• Selling premium wins more often (4 of 5 scenarios) but can lose big on the 1 bad outcome — use defined-risk spreads, not naked positions.
• Never ignore Vega around earnings or major economic events, even if theta looks great.
• Start further out in time (60+ DTE) while learning — lower gamma means Greeks behave more predictably.
• Track WHERE your profit actually came from: price move (delta), acceleration (gamma), time (theta), or volatility change (vega) — don't assume it was all direction.

🧭 STRATEGY FINDER — Answer 4 Quick Questions, Get Matched Strategies

Not sure which strategy fits your outlook? Answer below and it'll point you to 1-3 close matches with a jump-link to the full details, worked example, and PDF/rules where available. This is a helper, not a replacement for the guide below — always read the full strategy row before trading it.

1. What's your outlook on the stock?

2. How confident / how big a move?

3. Timeframe?

4. Do you want defined risk, or are you comfortable owning/selling the stock?

🧮 LIVE OPTIONS PAYOFF CALCULATOR — Use YOUR Real Numbers

Every worked example above uses a fake "XYZ @ $100" for teaching. Here, plug in your OWN strikes and premiums for a real trade you're actually looking at, and get the real max risk, max reward, and breakeven — plus a payoff table across a range of prices at expiry.

Current Stock Price ($)

Number of Legs

1. RANGE-BOUND / SIDEWAYS

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Iron Condor	↔ Range	1. Choose expiry (30-45 DTE) 2. Sell OTM call (~20 delta) 3. Buy further OTM call (~5-10 delta) 4. Sell OTM put (~20 delta) 5. Buy further OTM put (~5-10 delta) 6. Enter ALL legs at once	Max Reward: Net Credit x 100 Max Risk: (Spread Width x 100) - Credit Breakevens: Short Strike +/- Net Credit	Setup: Sell 105 Call ($1.50), Buy 110 Call ($0.50). Sell 95 Put ($1.50), Buy 90 Put ($0.50). Net Credit: $2.00 ($200). Max Reward: $200 (if XYZ stays between $95-$105). Max Risk: ($5 width - $2 credit) x 100 = $300. Breakevens: $107 (upper) and $93 (lower). SMB desk numbers: preferred entry when SPX IV is ~16-18. High-probability version uses ~10 delta shorts, 20-point wide strikes; target profit ~5% of planned capital, max loss ~15%. Wins most months, loses 2-3x/year. Take profit at 10-15% or 15-20% of capital; if a trade runs 20 days with many adjustments in a trending market, cut around 10 days to expiry.
Short Strangle	↔ Wide Range	1. Choose expiry (7-30 DTE) 2. Sell OTM call (~10 delta) 3. Sell OTM put (~10 delta) 4. Enter BOTH legs at once 5. Close at 50% profit	Max Reward: Total Premium Received Max Risk: Effectively Unlimited (Put side capped at strike x 100) Breakevens: Short Call Strike +/- Credit; Short Put Strike +/- Credit	Setup: Sell 105 Call ($1.50), Sell 95 Put ($1.50). Net Credit: $3.00 ($300). Max Reward: $300 (if XYZ stays between $95-$105). Max Risk: Unlimited above $105. Put side max loss if XYZ goes to $0 is $9,200. Breakevens: $108 (upper) and $92 (lower). SMB desk rule: naked short strangles are explicitly BANNED on the SMB income desk — called "the kind of trade where you blow up your account one day." Use the defined-risk Iron Condor instead.
Covered Call	↔ Slightly Up	1. Own 100 shares per contract 2. Sell 1 OTM call per 100 shares 3. Strike 5-15% above current price 4. Choose 30-45 DTE	Max Reward: (Strike - Entry) x 100 + Premium Max Risk: Stock drops to $0 (you own the shares) Breakeven: Stock Entry Price - Premium Received	Setup: Own 100 shares bought at $100. Sell 105 Call for $2.00 ($200). Max Reward: $500 (stock gain) + $200 (premium) = $700 (if XYZ hits $105). Max Risk: Stock drops to $0. Total loss = $10,000 - $200 = $9,800. Breakeven: $98.00. SMB real numbers (1-year demo): own 100 shares at $200 (1.5% dividend). Sell the 220 Call, 1yr out, for $17.00. If stock stays below 220: keep shares + $1,700 premium + $300 dividend = $2,000 (10% cash return vs 1.5% dividend alone). If called away at 220: total $4,000 (a 20% year).
Cash-Secured Put	↔ Slightly Up	1. Set aside cash to buy 100 shares 2. Sell 1 OTM put (~20-30 delta) 3. Choose 30-45 DTE 4. Keep cash as collateral	Max Reward: Premium Received x 100 Max Risk: Strike x 100 (if stock drops to $0, you must buy) Breakeven: Short Strike - Premium Received	Setup: Cash in account: $9,500. Sell 95 Put for $2.00 ($200). Max Reward: $200 (if XYZ stays above $95). Max Risk: XYZ goes to $0. Loss = $9,500 - $200 = $9,300. Breakeven: $93.00.
Iron Butterfly	↔ Pin	1. Choose expiry (30-40 DTE) 2. Sell ATM call 3. Sell ATM put 4. Buy further OTM call (wings) 5. Buy further OTM put (wings) 6. Enter ALL legs at once 7. Wait for a volatility pop before entering	Max Reward: Net Credit x 100 Max Risk: (Wing Width x 100) - Net Credit Breakevens: Short Strike +/- Net Credit Tip: Sell ATM, buy wings for protection. Profit zone = between wing strikes.	Setup: Sell 100 Call ($3), Sell 100 Put ($3). Buy 105 Call ($1), Buy 95 Put ($1). Net Credit: $4.00 ($400). Wings are $5 wide. Max Reward: $400 (if XYZ pins exactly at $100 at expiry). Max Risk: ($500 width - $400 credit) = $100. Breakevens: $104 (upper) and $96 (lower). SMB real numbers (index @1880, 8-week hold): sold 1880 Call ($83.95) + 1880 Put ($84.10), bought 1980 Call ($37.55) + 1780 Put ($49.65) protection. Net credit $8,155. Index closed at 1885.23 — only short call had value ($523). Profit: $7,592, over 400% return on ~$1,885 margin required.
Butterfly Spread	↔ Pin	1. Buy 1 call at lower strike (A) 2. Sell 2 calls at middle strike (B) 3. Buy 1 call at higher strike (C) 4. Strikes equally spaced 5. Enter ALL legs at once	Max Reward: (Strike Width - Net Debit) x 100 Max Risk: Net Debit Paid Breakevens: Middle Strike +/- Net Debit	Setup: Buy 95 Call ($4), Sell 2x 100 Call ($1.50), Buy 105 Call ($0.50). Net Debit: $400 - $300 + $50 = $150. Max Reward: ($5 width - $1.50) x 100 = $350 (if XYZ hits exactly $100). Max Risk: $150. Breakevens: $98.50 (lower) and $101.50 (upper).

2. SMB FLAGSHIP INCOME TRADE — THE RHINO SMB DESK ONLY

Why it's separate from Iron Condor/Butterfly above: the Rhino is a broken-wing butterfly — two put spreads sharing one short strike — built to survive being wrong for weeks while still collecting theta. It is SMB's actual flagship market-neutral trade, not a textbook structure.

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (SMB's real numbers)
The Rhino (Broken Wing Butterfly)	↔ Neutral, 11wk	1. Underlying: RUT (Russell 2000) preferred — sits in a volatility "sweet spot" 2. Enter 70-84 days to expiration (commonly 77 days) 3. Buy puts at the top strike (5-15 pts ITM) 4. Sell 2x puts at a strike 40 points below the top strike 5. Buy puts at a strike 50 points below that short strike 6. Enter on a sell-off day for better pricing 7. Adjust/roll hedges as price moves — stay roughly delta-neutral	Max Reward: ~10% of planned capital (target); avg realised win closer to 4% Max Risk: capped at ~10% of allocated capital by design Win Rate: SMB states over 80%, around 84% historically	Structure (per 5-lot): Buy 5 puts at top strike. Sell 10 puts (2x) at 40 pts below. Buy 5 puts at 50 pts below that. Capital needed: budget $15,000-$21,000 for a full 5-lot ($25,000 used as safe planning reference). Target profit: ~10% of capital (~$2,500 on $25,000); average realised win is smaller, ~4%. Real case: an August trade survived a 200+ point rally via repeated hedge rolls, moving from +$450 to holding at +$275 — proof the structure tolerates being wrong for a while. Crash rule: NOT built to survive a genuine crash — exit early if the index drops ~20% during the trade's life rather than riding to max loss. Sizing rule: never run more than 3-4 overlapping Rhinos at once (normally 2, occasionally 3).

3. HIGH CONVICTION BULLISH ↑↑

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Long Call	↑↑ Big Up	1. Check expiry: 30-60 DTE for swing (or same-day for 0DTE momentum) 2. Choose strike: ATM or slightly OTM (20-30 delta default for 0DTE) 3. Buy 1 call contract per 100 shares 4. Set stop: exit if thesis breaks 5. Spread filter: skip if bid/ask spread is over ~10% of premium	Max Reward: Unlimited Max Risk: Net Debit Paid (Premium) Breakeven: Long Strike + Net Debit	Setup: Buy 105 Call for $2.00 ($200). Max Reward: Unlimited (if XYZ surges to $120, value is $1,500 - $200 = $1,300). Max Risk: $200 (if XYZ stays below $105). Breakeven: $107.00. SMB 0DTE version: XYZ breaks a range at 50 on volume. Buy the 53 Call (~25 delta) for 1.20. Runs to 56, option to 3.75. Profit $255/contract (~3x). Rule: once up 100%, sell half to make the rest "risk free." Size up to 50% of premium before noon (vs. a stock-price stop); after noon, size assuming full premium loss.
Debit Call Spread	↑ Moderate	1. Buy lower strike call (e.g. ATM) 2. Sell higher strike call (e.g. 5-10% above, ~20-30 delta short leg) 3. Same expiry for both legs 4. Enter BOTH legs at once	Max Reward: (Strike Width - Net Debit) x 100 Max Risk: Net Debit Paid Breakeven: Lower Strike + Net Debit	Setup: Buy 100 Call ($4.00), Sell 110 Call ($1.00). Net Debit: $3.00 ($300). Max Reward: ($10 width - $3 debit) x 100 = $700 (if XYZ hits $110). Max Risk: $300. Breakeven: $103.00. SMB rule: take profit around 80% of max profit, don't hold to expiry. Suggested duration 14-21 days for lower conviction, as little as 7 days for high conviction.
Call Ladder / Backspread	↑↑ Huge Up	1. Buy 2 calls at higher strike (e.g. ATM) 2. Sell 1 call at lower strike (e.g. 5% below ATM) 3. All same expiry 4. Enter ALL legs at once	Max Reward: Unlimited (asymmetric upside) Max Risk: Net Debit Paid (capped on rally) Breakeven: Usually one lower breakeven (rare) and one higher breakeven on the upside.	Setup: Buy 2x 100 Call ($4.00 each), Sell 1x 95 Call ($5.00). Net Debit: $800 - $500 = $300. Max Reward: Unlimited if XYZ surges (you own 2 calls, short 1). Max Risk: $300 if XYZ rallies high (short call is capped). Breakeven: $108.00 (upper). Below 95 it loses $300.
LEAPS Call	↑ Long-Term	1. Choose 6-18 month expiry 2. Buy ATM or slightly OTM call 3. Enter as single order 4. Hold until thesis plays out	Max Reward: Unlimited Max Risk: Net Debit Paid Breakeven: Long Strike + Net Debit	Setup: Buy 12-month 100 Call for $8.00 ($800). Max Reward: Unlimited (if XYZ goes to $130 in 12 months). Max Risk: $800 (if XYZ stays below $100). Breakeven: $108.00.

4. MEDIUM CONVICTION BULLISH ↑

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Bull Put Spread (Credit Spread)	↑ Gradual	1. Sell higher strike put (e.g. 20-30 delta) 2. Buy lower strike put for protection 3. Same expiry, both legs 4. Enter BOTH legs at once	Max Reward: Net Credit x 100 Max Risk: (Spread Width - Net Credit) x 100 Breakeven: Higher Strike - Net Credit	Setup: Sell 95 Put ($2.00), Buy 90 Put ($0.50). Net Credit: $1.50 ($150). Max Reward: $150 (if XYZ stays above $95). Max Risk: ($5 width - $1.50) x 100 = $350. Breakeven: $93.50. SMB rule: this is SMB's preferred way to sell premium — naked short puts are explicitly banned on the desk. Never let a low-delta credit spread (~10 delta) run to max loss — one bad loss can erase ~15 winning trades.
ATM Long Call	↑ Moderate	1. Choose 30-45 DTE expiry 2. Buy ATM call (50 delta) 3. Monitor IV: enter when low 4. Exit on thesis break or target	Max Reward: Unlimited Max Risk: Net Debit Paid Breakeven: ATM Strike + Net Debit	Setup: Buy 100 Call (ATM) for $3.00 ($300). Max Reward: Unlimited (if XYZ surges). Max Risk: $300. Breakeven: $103.00.
Risk Reversal	↑ Bullish	1. Buy ATM/OTM call 2. Sell OTM put to fund the call 3. Same expiry for both legs 4. Enter BOTH legs at once	Max Reward: Unlimited (upside) Max Risk: Downside if assigned (put strike drops to $0) Breakeven: One upside breakeven, one downside breakeven (where short put assignment breaks even).	Setup: Buy 100 Call ($5.00), Sell 95 Put ($2.00). Net Debit = $300. Max Reward: Unlimited if XYZ surges. Max Risk: Huge downside if XYZ crashes (you own shares at $95). Max theoretical loss = $9,500 - $300 = $9,200. Breakevens: $103.00 (upper) and $98.00 (lower). SMB desk view: one SMB trader calls this a higher-risk trade he personally would NOT take — better suited to high-volatility names, generally preferring a cleaner debit spread instead. Effectively like being long the stock from the put strike down to zero if assigned.

5. BREAKING NEWS MOMENTUM (0DTE) SMB DESK ONLY

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (real SMB case)
Breaking News Long Call/Put	↑↓ Headline	1. Same mechanic as Long Call/Put, triggered by a sudden headline (earnings, M&A, macro) 2. Watch for a volume spike after the headline (e.g. 20k shares to 1 million) 3. Enter on the first actionable bar — often a 1-2 minute break of the post-news high/low 4. Stop: mental/tight, tied to a reclaim of the pre-news level	Max Reward: Uncapped, realistically 2-5x on a strong headline day Max Risk: Full premium if momentum stalls and you fail to exit fast	Real case: TSLA weekly puts bought on a surprise headline. Entry: 3.18. Exit: 11.50 to 12.00. Result: roughly 3.6x on the trade. Warning: market makers reprice the expected move DOWN fast once speed fades — be ready to tighten the trail immediately.

6. MEDIUM CONVICTION BEARISH ↓

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Bear Put Spread	↓ Gradual	1. Buy higher strike put (e.g. ATM) 2. Sell lower strike put for protection 3. Same expiry, both legs 4. Enter BOTH legs at once	Max Reward: (Strike Width - Net Debit) x 100 Max Risk: Net Debit Paid Breakeven: Higher Strike - Net Debit	Setup: Buy 100 Put ($4.00), Sell 95 Put ($1.00). Net Debit: $3.00 ($300). Max Reward: ($5 width - $3 debit) x 100 = $200 (if XYZ drops to $95). Max Risk: $300. Breakeven: $97.00.
Bear Call Spread (Credit Spread)	↓ Gradual	1. Sell lower strike call (e.g. 20-30 delta) 2. Buy higher strike call for protection 3. Same expiry, both legs 4. Enter BOTH legs at once	Max Reward: Net Credit x 100 Max Risk: (Spread Width - Net Credit) x 100 Breakeven: Lower Strike + Net Credit	Setup: Sell 105 Call ($2.00), Buy 110 Call ($0.50). Net Credit: $1.50 ($150). Max Reward: $150 (if XYZ stays below $105). Max Risk: ($5 width - $1.50) x 100 = $350. Breakeven: $106.50. SMB rule: defined-risk only — never naked. Same "1 max loss erases ~15 wins" logic applies here as the bull put spread.
Long Put (ATM)	↓ Bearish	1. Check expiry: 30-60 DTE for swing 2. Choose ATM or slightly OTM put 3. Buy 1 put contract per 100 shares 4. Set stop on thesis break	Max Reward: Strike x 100 - Premium (if stock to $0) Max Risk: Net Debit Paid Breakeven: Long Strike - Net Debit	Setup: Buy 100 Put (ATM) for $3.00 ($300). Max Reward: $3,000 - $300 = $2,700 (if XYZ drops to $0). Max Risk: $300. Breakeven: $97.00.

7. HIGH CONVICTION BEARISH ↓↓

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Long Put (OTM)	↓↓ Crash	1. Choose OTM put (10-20 delta) 2. 30-45 DTE for event plays 3. Buy 1 put contract 4. Exit fast on big move	Max Reward: Strike x 100 - Premium Max Risk: Net Debit Paid Breakeven: Long Strike - Net Debit	Setup: Buy 90 Put (OTM) for $1.50 ($150). Max Reward: $9,000 - $150 = $8,850 (if XYZ crashes to $0). Max Risk: $150. Breakeven: $88.50.
Put Backspread	↓↓ Huge Drop	1. Buy 2 puts at higher strike (e.g. ATM) 2. Sell 1 put at lower strike (e.g. 5% below ATM) 3. All same expiry 4. Enter ALL legs at once	Max Reward: Unlimited (asymmetric downside) Max Risk: Net Debit Paid (capped on rally) Breakeven: One lower breakeven. Upper side max loss is the debit paid.	Setup: Buy 2x 100 Put ($4.00 each), Sell 1x 95 Put ($5.00). Net Debit: $800 - $500 = $300. Max Reward: Unlimited if XYZ crashes (you own 2 puts, short 1). Max Risk: $300 if XYZ rallies high (short put expires worthless, longs too). Breakeven: $98.50 (lower).

8. BIG MOVE — UNCLEAR DIRECTION

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (XYZ @ $100)
Long Straddle	↑↓ Big Move?	1. Choose expiry: before catalyst (5-10 DTE) 2. Buy ATM call (50 delta) 3. Buy ATM put (50 delta) 4. Enter BOTH legs at once 5. Exit immediately after catalyst	Max Reward: Unlimited both ways Max Risk: Total Debit Paid Breakevens: ATM Strike +/- Total Debit	Setup: Buy 100 Call ($3.00), Buy 100 Put ($3.00). Total Debit: $6.00 ($600). Max Reward: Unlimited (if XYZ gaps up or down hard). Max Risk: $600 (if XYZ stays flat at $100). Breakevens: $106.00 (upper) and $94.00 (lower).
Long Strangle	↑↓ Big Move?	1. Choose expiry: before catalyst 2. Buy OTM call (e.g. 10-15 delta) 3. Buy OTM put (e.g. 10-15 delta) 4. Enter BOTH legs at once 5. Close at 50-100% profit	Max Reward: Unlimited both ways Max Risk: Total Debit Paid Breakevens: Short Call Strike +/- Debit; Short Put Strike +/- Debit	Setup: Buy 105 Call ($1.00), Buy 95 Put ($1.00). Total Debit: $2.00 ($200). Max Reward: Unlimited if XYZ crashes or surges hard. Max Risk: $200 (if XYZ stays between $95-$105). Breakevens: $107.00 (upper) and $93.00 (lower).

9. VOLATILITY / TIME DECAY PLAYS (Calendar & Diagonal)

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example
Calendar Spread	↔ Low to High IV	1. Sell near-term option (7-30 DTE) 2. Buy same-side long-term option (60-90 DTE) 3. Same strike for both legs 4. Enter BOTH legs at once 5. SMB rule: never sell an expiry with earnings the day before it; never trade through earnings	Max Reward: Value of back-month option if front-month expires worthless Max Risk: Net Debit Paid (if IV crushes or stock drifts away) Breakevens: Near-term expiry: Strike +/- Short Option's Value.	Textbook setup: Sell Jan 100 Call ($2.00), Buy Mar 100 Call ($4.00). Net Debit $200. SMB real numbers (put calendar, 10 contracts, near the money): short-leg vega ~$5,285/1% IV move; long-leg vega ~$7,651/1% IV move. Short-term IV 11%, long-term IV 9-10% (backwardation). If IV mean-reverts, the bigger-vega LONG leg gains more than the short leg loses — profit from convergence alone. SMB exit rule: stop 10-15% loss, profit target 10-15%, or time-exit 7-8 days before short expiration — never hold into expiration week. Real SPX calendar batch example ran ~5% over 3 months.
Diagonal Spread	↗ Tilted + Vol	1. Sell near-term option (7-30 DTE) 2. Buy different-strike long-term option (60-90 DTE) 3. Same side (calls or puts) 4. Enter BOTH legs at once	Max Reward: High (if stock moves favorably, back-month retains value) Max Risk: Net Debit Paid (if stock stays flat and IV drops) Breakevens: Near-term expiry: Strike +/- Short Option's Value.	Setup: Sell Jan 100 Call ($2.00), Buy Mar 105 Call ($3.00). Net Debit: $1.00 ($100). Max Reward: If XYZ hits $105+, Jan call expires worthless, Mar call is deep ITM. Max Risk: $100 (if XYZ stays around $100 on Jan expiry). Breakeven: ±$1.00 from $100 on Jan expiry (assuming Mar call keeps ~$1.00 value).

10. MACRO TREND TRADING (months to years)

⚠ Why most options FIGHT macro trends: Theta bleeds long options daily even when you're right on direction. IV crush hits when you buy a hot theme at expensive IV. A slow grind in your favour can still lose money with the wrong structure. Never use short-dated long options or straddles for a slow macro theme — those are event trades.
Prices below are illustrative only (not live quotes) — use for structure, not entry levels.

Strategy	Outlook	How to Place the Trade	Max Risk / Max Reward	Worked Example (illustrative)
LEAPS ⭐ (best fit for macro)	↗ 6-18mo Trend	1. Choose 6-18 month expiry 2. Buy ATM/slightly ITM call (bull) or put (bear), delta ~0.70-0.85 3. Most theta bleed is in final 90 days — exit/roll before then 4. Enter as single order	Max Reward: Unlimited (call) / Strike x 100 - Premium (put) Max Risk: Net Debit Paid Breakeven: Strike +/- Net Debit	Theme: Bullish rate-cut trade via a bond ETF at $90. Setup: Buy 12-month 90 Call for $7.00 ($700). Max Reward: Unlimited (ETF to $105 → value ~$1,500 - $700 = $800+). Max Risk: $700 (if ETF stays below $90). Breakeven: $97.00. Why LEAPS: slow theta, delta ~0.80 tracks the ETF like leveraged stock.
Diagonal / PMCC ⭐ (most efficient)	↗ Trend + Theta	1. Buy a deep-ITM LEAPS call (delta ~0.80, 9-12mo out) 2. Sell a shorter-dated OTM call against it (30-45 DTE) 3. Roll the short call forward each month, collecting premium 4. Short calls fund your LEAPS time decay	Max Reward: Capped each cycle at short strike; keep rolling as trend develops Max Risk: Net Debit (LEAPS cost - premiums collected) Breakeven: Lowered each month by premium collected	Theme: Bull trend on an index ETF at $100. Setup: Buy 12-month 90 Call (deep ITM) for $15.00 ($1,500). Sell 30-day 110 Call for $2.00 ($200). Net Debit after first sale: $1,300. Max Reward: LEAPS gains + premiums collected (capped at $110/cycle). Max Risk: $1,500 minus all premiums collected. Why best: the front-month theta you SELL offsets the LEAPS theta you PAY.
Debit Spread (Rolled)	↗ Steady Grind	1. Buy directional option (e.g. ATM) 2. Sell further OTM same-side option 3. Short leg offsets theta and IV cost 4. Roll the whole spread forward as theme develops	Max Reward: (Strike Width - Net Debit) x 100 Max Risk: Net Debit Paid Breakeven: Long Strike +/- Net Debit	Theme: Bullish oil trade via an oil ETF at $80. Setup: Buy 6-month 80 Call ($6.00), Sell 6-month 95 Call ($2.00). Net Debit: $4.00 ($400). Max Reward: ($15 width - $4 debit) x 100 = $1,100 (if ETF hits $95). Max Risk: $400. Breakeven: $84.00. Roll forward if theme runs past 6 months.
Risk Reversal	↗ High Conviction	1. Buy a call (bull), fund by selling a put (reverse for bear) 2. Near-zero net cost — theta is not your problem 3. Size it like you actually WANT the underlying at the short strike 4. Enter BOTH legs at once	Max Reward: Unlimited (upside) Max Risk: Downside if assigned (put strike x 100) Breakevens: Upper (strike + debit); lower (put strike + credit)	Theme: Bullish dollar trade via a dollar ETF at $28. Setup: Buy 6-month 29 Call ($1.00), Sell 6-month 27 Put ($1.00). Net Cost: $0.00 (fully funded). Max Reward: Unlimited if ETF trends up. Max Risk: Assigned at $27 (own it at $27, loss to $0 = $2,700). Breakevens: $29 (upper) and $27 (lower). Only use if you'd happily own at $27.

Macro Rules of Thumb:
• LEAPS = the default macro structure (buy the time the theme needs).
• Diagonal / PMCC = most theta-efficient (sell front month to fund the back).
• Check IV Rank first — a hot macro theme usually means expensive premium. Wait for pullbacks in IV.
• AVOID: short-dated long options, straddles/strangles — those are event trades, not trend trades.
• For pure linear macro exposure, futures or the ETF itself often beat options (no theta, no IV crush).
• Use options for macro ONLY when you want: defined risk, leverage without margin calls, or a volatility view.
• Roll winners forward; don't hold into the final 90 days where theta accelerates.

11. GEOPOLITICAL / MACRO THEME TRADING (method)

Your edge is WHAT and roughly WHEN — not precise timing or price. Being right about the world ≠ making money. Trade the structural theme, not the event. Find the second-order beneficiary, not the obvious one. Expect to be early, so use time-rich instruments.

Principle	What it means in practice
Trade the theme, not the headline	By the time it's a headline, the first move is done. "Buy the rumour, sell the news." Position on the structural thesis before it's consensus, or on the second-order effect others haven't mapped.
Find the second-order play	War rising → not "buy oil on the day" but defence sub-suppliers / LNG infra positioned early. Sanctions → long the substitute supplier. Think one step past the obvious.
Assume you're early	Markets ignore obvious themes for months. Size small initially, add on confirmation. Never average down into a thesis just because you're "sure".
Informed ≠ differentiated	Before every trade: what's consensus, and am I actually differentiated or just well-read? If everyone read the same thing, there's no edge.
Respect the tape over your logic	"Clearly deteriorating" situations can rally (priced-in bad news, relief, less-bad-than-feared). Price is the referee, not your worldview.
Define the falsifier upfront	Write what would prove you WRONG before entering. Exit on being wrong, not on being bored or scared. Geopolitical traders fall in love with theses and ride them to zero.

Instrument Decision Tree

Situation	Best Instrument
Known DATED event, big move expected in DAYS (election night, OPEC, CPI)	Short-dated defined-risk: debit spread if directional; long straddle/strangle if direction unknown. This is an EVENT trade.
Directional THESIS over MONTHS	The ETF or stock itself (no theta, hold indefinitely), or LEAPS for leverage with capped downside. This is a TREND trade.
Slow grind in one direction over quarters	Diagonal / Poor Man's Covered Call — harvest theta while you wait.
Want exposure but waiting for a better entry	Sell cash-secured puts on the theme name — get paid to wait, assigned lower if it dips.
Conviction but uncertain timing	Small position in the underlying now, add on confirmation. Don't force leverage onto uncertain timing.

The #1 trap: reaching for weekly calls on a geopolitical hunch. Your edge plays out over months — your instrument must too. Short-dated options are for dated events, never for a worldview.

Workflow: (1) Keep a themes list with the second-order play + falsifier for each. (2) Wait for a catalyst OR an IV/price pullback — don't chase when hot & expensive. (3) Pick the instrument by timeframe. (4) Size for being early. (5) Journal thesis + falsifier so you exit on being wrong.

12. WIN RATE vs REWARD — THE HONEST TRADE-OFF (SMB's own framing)

Highest Win Rate (small, capped wins, tail risk if unhedged)	Lower Win Rate, Bigger Asymmetric Payoff
Iron Condor, Iron Butterfly, the Rhino, Credit Spreads, Covered Calls. SMB's own number: selling premium wins in 4 of 5 possible outcomes for any single option bet. Rhino win rate: ~84%. High-probability Iron Condor: wins most months, loses only 2-3x/year.	Long Calls/Puts (0DTE), Breaking News trades, Risk Reversals. Most 0DTE long option trades lose some or all of the premium — but the occasional 3-5x winner is the payoff hunted here.

The rule that ties it together (SMB's own words): never let a low-delta credit spread run to full max loss — one bad loss can erase about 15 winning trades. This is why every income strategy SMB actually teaches is a DEFINED-RISK SPREAD, never a naked short position — high win rate only survives long-term if the rare loss is capped.