7 DTE Rolling Put Vertical

This is a strategy that I'm still learning about and have little experience using. I'll be updating this page as I learn more. Therefore, nothing on this page is set in stone, and it may not reflect the actual trades that I will be using in the moment.

Opening

This strategy involved opening a put vertical with the short strike at 12 delta and a width of 40. This should give a decent premium while theta is high and PoP is >90%.

The point of this strategy is to take advantage of the high theta with 5-7 DTE on a spread, and then roll the spread back into 7 DTE every 2 days (Monday, Wednesday, Friday). This way, the theta stays high and we can consistently collect premium three times a week.

I am aiming for a roll credit of 0.90 per share or $90, which is slightly above 2% of the risk ($4000 because the width of the spread is 40). Doing this 3 times a week will result in gaining $270 which is around 6%. If this happens consistently, I would get a full return on money in 15 weeks. Remember this is not compounding profits since I’m not actually adjusting the size of the spread, but simply just collecting premiums.

What if the Market Moves Down?

When the trade moves against us, the spread will still most likely expire OTM so we can hold until expiry if that happens. But if we are worried that it has the chance to expire ITM, we can do the same roll as otherwise for a small debit instead of a credit like usual. In most cases, we should be able to roll into more favorable strikes while still gaining a small credit as long as we do this early enough into the down move. We don’t lose too much by doing this since when we roll back into 12 delta we will gain a larger credit than usual.