02 · The Strategy Selector — Tags → Candidate Strategies

Educational use only — not investment advice. See full disclaimer in README.md.

This is the centerpiece of the manual. You arrive here with your three tags from 01-market-assessment.md. You leave with a short list of 2–4 candidate strategies that fit today’s conditions. Then you open the matching strategy file, confirm fit, and run the checklist.

How to use this page:

  1. Find your Direction (row) × Volatility/IVR (column) in the master matrix below → that cell lists candidates.
  2. Cross off any candidate your account can’t trade (04-account-and-approval.md).
  3. If there’s a catalyst (earnings/macro), jump to the Catalyst overrides section — it can replace the matrix entirely.
  4. Open the strategy file, read “Use this when,” pick one, proceed to sizing.

The organizing principle (never forget it): the column you’re in (IVR) decides BUY vs SELL premium; the row you’re in (direction) decides the shape. High IVR → sell; low IVR → buy. Everything below is that one idea, expanded.

THE MASTER MATRIX

Legend: 🟢 defined risk · 🔴 undefined/naked risk (L4) · (file) = where to read it. NB = net buyer / long premium · NS = net seller / short premium.

↓ Direction \ IVR → LOW (<30) — buy premium MID (30–50) — either HIGH (>50) — sell premium VERY HIGH (>70) — sell, size down
BULLISH (strong) 🟢 Bull call debit spread · 🟢 Long call · 🟢 PMCC (NB) 🟢 Bull call debit spread · 🟢 Bull put credit spread (pick by IV trend) 🟢 Bull put credit spread · 🔴/🟢 Cash-secured put (NS) 🟢 Bull put credit spread (narrow, small) · 🟢 CSP far OTM (NS)
BULLISH (weak / lean) 🟢 Bull call debit spread (forgiving) · 🟢 Call BWB for a credit 🟢 Bull put credit spread · 🟢 Bull call debit spread 🟢 Bull put credit spread · 🟢 Jade lizard (NS) 🟢 Bull put credit spread (small) · 🟢 Jade lizard
BEARISH (strong) 🟢 Bear put debit spread · 🟢 Long put · 🟢 Put backspread (NB) 🟢 Bear put debit spread · 🟢 Bear call credit spread 🟢 Bear call credit spread (NS) 🟢 Bear call credit spread (narrow, small) (NS)
BEARISH (weak / lean) 🟢 Bear put debit spread · 🟢 Put BWB for a credit 🟢 Bear call credit spread · 🟢 Bear put debit spread 🟢 Bear call credit spread (NS) 🟢 Bear call credit spread (small)
NEUTRAL / RANGE 🟢 Calendar / double calendar (NB, long vega) · 🟢 Long fly (cheap pin bet) 🟢 Iron condor (wider) · 🟢 Calendar 🟢 Iron condor · 🟢 Iron fly · 🔴 Short strangle (NS) 🟢 Iron condor (wide wings, small) · 🔴 Short strangle (tiny, far OTM)
NO VIEW (pure vol) 🟢 Long straddle / strangle if you expect a move · 🟢 Calendar Usually stand down — no edge 🟢 Iron condor (harvest high IV) · 🔴 Short strangle 🟢 Iron condor (defensive) — or stand down

If a cell points to undefined-risk (🔴) and your account is defined-risk-only, use the defined-risk substitute: short strangle → iron condor; short straddle → iron fly; CSP (if you don’t want assignment risk/capital) → bull put spread; naked call → bear call spread.

Reading the matrix: the logic in each region

Bullish + Low IVR (top-left). Options are cheap and you want up-exposure → buy it. A bull call debit spread is the workhorse (defined risk, cheaper than a naked long call, less theta bleed). High conviction + cheap vol = a long call or PMCC (stock replacement) makes sense. Don’t sell a bull put spread here — low IV means thin credit for the risk.

Bullish + High IVR (top-right). You still want up-exposure, but options are expensive → sell it. A bull put credit spread profits if price rises, stays flat, or even drifts down slightly — and you’re selling the rich premium, so IV reversion helps you. A cash-secured put is the same idea if you’d happily own the stock lower (and have the capital/approval). This is the highest-probability way to be bullish in high IV.

Bearish, mirror image. Low IVR → bear put debit spread / long put / put backspread (buy cheap downside; backspreads love that down-moves often raise IV). High IVR → bear call credit spread (sell expensive premium above the market; profit if price falls, sits, or rises slightly).

Neutral + High IVR (the premium-seller’s home). Rangebound price + expensive options = sell a delta-neutral premium structure. Iron condor (defined) or short strangle (undefined, more credit) when you expect price to stay between two levels; iron fly / short straddle when you expect price to pin near one level and want max premium. IV reversion + theta both pay you.

Neutral + Low IVR. Selling premium pays too little to be worth the pin risk. Instead, calendars/double calendars — you buy the cheap longer-dated option and sell the shorter-dated one, profiting from the front-month decaying faster and from IV expanding (you’re net long vega). Or a cheap long butterfly as a low-cost bet that price pins a target.

No view + Low IVR + expecting a move. If you have no directional view but think the market will move (a coil, a pending catalyst) and options are cheap → long straddle/strangle (buy vol). If you have no view and no vol thesis → stand down.

CATALYST OVERRIDES (these can replace the matrix)

If 01-market-assessment.md flagged a catalyst, it dominates. See strat-volatility-event.md and the 06-playbooks.md earnings/FOMC playbooks for the full detail.

Earnings on the underlying

First compute the expected move ≈ ATM straddle price (the move the market has already priced in). Then:

Your thesis going into earnings Candidate Why
“It moves more than priced-in” (direction unknown) 🟢 Long straddle/strangle (only if IVR/term-structure isn’t already extreme) Long the move; needs realized > implied to beat the crush
“It moves less than priced-in” / stays near here 🟢 Iron condor / iron fly around the expected move · 🟢 Calendar at the strike Harvest the IV crush; defined risk
“It moves less, undefined-risk OK” 🔴 Short strangle/straddle Max crush harvest, but gap risk — L4, size tiny
Directional + want crush on your side 🟢 Bull put / bear call credit spread outside the expected move Directional lean + sell rich pre-earnings IV
No edge on the event Stand down, or trade it after the crush once IV normalizes Most long-premium earnings trades lose to the crush

Iron rule: do not hold an undefined-risk short-premium position through earnings unless the earnings vol-crush harvest is your deliberate, sized-for-the-gap plan.

Macro events (FOMC / CPI / Jobs / PCE)

  • Index IV elevates into the print and relaxes after. Reduce size, prefer defined risk, and consider simply waiting until after the event to deploy — uncertainty resolves and pricing normalizes within hours. Detailed in 06-playbooks.md.

Goal-based quick index (when you’re thinking “I want to ___”)

Your stated goal is all of the above, so here’s the fast path by intent:

I want to… Go to Typical structures
Generate income / harvest theta strat-neutral-income.md Iron condor, CSP, covered call, the Wheel, short strangle (L4)
Bet up with defined risk strat-bullish.md Bull call/put spread, long call, PMCC
Bet down with defined risk strat-bearish.md Bear put/call spread, long put
Trade a move / an event (vol) strat-volatility-event.md Straddle, strangle, calendar, earnings condor
Protect stock I own strat-hedging.md Protective put, collar, index put hedge
Replace stock with less capital strat-bullish.md PMCC, LEAPS call, risk reversal

The decision flow in one block

   3 tags from 01 ─►  Is there a CATALYST (earnings/macro)?
                       │
              ┌────────┴────────┐
            YES               NO
              │                 │
   Use Catalyst Overrides   Direction × IVR in MASTER MATRIX
   (expected move first)         │
              │                 │
              └────────┬────────┘
                       ▼
            Candidate list (2–4)
                       │
        Filter by YOUR approval level (04-…)
        Swap any 🔴 for its 🟢 substitute if needed
                       │
                       ▼
        Still ≥1 candidate?  ──NO──►  STAND DOWN (no-trade day)
                       │
                      YES
                       ▼
        Open strategy file → read "Use this when"
        → does it TRULY fit today? ──NO──► next candidate / stand down
                       │
                      YES
                       ▼
        Pick ONE → 03-risk-and-sizing → 05-checklists → place

Two full walk-throughs

1) Tags = Bullish (weak) · High IVR (58) · No catalyst. Matrix cell → Bull put credit spread · Jade lizard. Account is L3 → both available. You only have a mild bullish lean and IV is rich, so the bull put credit spread is ideal: it wins if SPY rises, chops sideways, or even slips a little, and you’re selling expensive premium that should decay as IV reverts. Open strat-bullish.md → Bull Put Spread → confirm “Use this when” (mild bullish + high IVR ✓) → size → checklist → place.

2) Tags = No view · Low IVR (18) · Earnings on NVDA in 2 days. Catalyst override fires. Compute NVDA expected move from the ATM straddle (say ±9%). You have no directional view but think the move could exceed what’s priced in, and IVR is low-ish for NVDA pre-earnings (unusual — front-month is always bid, but back-month cheap) → candidate long straddle or, if you’d rather harvest the crush, a calendar at the ATM strike. Open strat-volatility-event.md, read the earnings mechanics, decide long the move vs short the vol, size for a total loss of the debit (these can go to zero), checklist, place — and know your exit before the print.

Next: you’ve got a candidate. Confirm what your account can run → 04-account-and-approval.md. Then size it → 03-risk-and-sizing.md.