05 · Checklists — The Pre-Flight System

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

This is the final gate before money moves. A pilot doesn’t take off from memory — they run the checklist every single time, including the 10,000th. You do the same. The rule is binary: every box ✓ → place the order; any box ✗ → stand down. No “close enough.”

Use it in this order:

Universal Pre-Flight (below) — applies to every trade.
The family quick-checklist for your strategy type (credit / debit / neutral / vol / hedge).
The strategy file’s own Entry checklist (the most specific one).

⭐ THE UNIVERSAL PRE-FLIGHT CHECKLIST

Run this for every trade, no exceptions.

A. Thesis & fit

[ ] I can state my thesis in one sentence (direction and/or vol view).
[ ] My three tags (Direction · IVR · Catalyst) match this strategy’s “Use this when.”
[ ] I know what makes me wrong and at what price/level the thesis is invalidated.
[ ] This is a trade I’m taking because it fits — not boredom, FOMO, or revenge.

B. Volatility check

[ ] I checked IV Rank on this specific underlying (not just the index).
[ ] My buy-vs-sell choice agrees with IVR (selling in high IVR / buying in low IVR), or I have a deliberate reason it doesn’t.
[ ] I know whether IV is rising or falling and that it favors my position.

C. Catalyst check

[ ] I checked for earnings on this underlying before my expiry. (If present → vol/event rules apply.)
[ ] I checked for macro events (FOMC/CPI/Jobs/PCE) before my expiry.
[ ] For short options on dividend-paying names: I checked the ex-dividend date (early-assignment risk).
[ ] If a catalyst exists, I’ve deliberately decided to trade it, hedge it, or avoid it — not sleepwalking into it.

D. Liquidity gate (non-negotiable)

[ ] Bid/ask is tight (pennies to a nickel on liquid names; never trade wide markets).
[ ] Healthy open interest and volume at my strikes.
[ ] The underlying itself is liquid (major ETF/index or large-cap with active options).
[ ] I will use a limit order and work the mid — never a market order on a spread.

E. Structure & strikes

[ ] DTE matches the strategy default (≈30–45 selling, 45–90 directional, etc.).
[ ] Strike deltas / widths match the strategy’s rules.
[ ] I know this trade’s max profit, max loss, and breakeven(s) — exact numbers, from the strategy file.
[ ] For credit trades: the credit is worth the risk (e.g., ≥⅓ of width on a vertical) — not a few pennies for huge risk.

F. Risk & sizing (from 03-risk-and-sizing.md)

[ ] Contracts sized so max loss ≤ my per-trade limit (rounded down).
[ ] Within my per-underlying and per-sector limits.
[ ] Aggregate portfolio risk still under my total cap after this.
[ ] Buying power used leaves a buffer (not maxed — survives a vol spike).
[ ] If undefined-risk: sized off a stress scenario, and I’m L4-approved.

G. The exit plan (decide BEFORE entry)

[ ] Profit target defined (e.g., 50% of credit) — and I’ll place a GTC order for it.
[ ] Loss/defense plan defined (close at 2× credit / thesis invalidation / tested strike rule).
[ ] Time stop noted (manage by ~21 DTE for short premium).
[ ] Management triggers written into my journal so I don’t re-decide under pressure.

If all of A–G are ✓ → place the limit order at mid and work it. If any box is ✗ → stand down. A no-trade is a valid, profitable outcome.

Family quick-checklists (add to the Universal)

🟢 Credit spreads (bull put / bear call / iron condor / iron fly)

[ ] IVR is elevated (ideally > 50) — you’re selling expensive premium.
[ ] Short strike at the intended delta (≈16–30); credit ≥ ~⅓ of the width.
[ ] Short strikes sit beyond key support/resistance (for condors, outside the expected move).
[ ] No earnings inside the expiry (unless it’s a deliberate earnings condor).
[ ] Profit target 50% (50–75% for condors); manage/roll by 21 DTE.

🟢 Debit spreads & long options (bull call / bear put / long call / long put)

[ ] IVR is low-to-moderate — you’re not overpaying for IV that can crush.
[ ] Enough DTE that theta won’t bleed you before the thesis plays out (≥45 DTE for swings).
[ ] Defined price target and stop; a plan to take profits into the move.
[ ] For long single options: I accept the position can go to zero; sized accordingly.
[ ] Breakeven is realistically reachable given the underlying’s expected move.

🟢 Neutral / premium income (iron condor, short strangle/straddle, calendars, Wheel)

[ ] Price is genuinely rangebound between mapped support and resistance.
[ ] IVR supports the structure (sell in high IVR; calendars in low IVR).
[ ] Short strikes outside the expected move; breakevens give room.
[ ] For undefined (strangle/straddle): L4-approved, sized for a gap, BP buffer intact.
[ ] For the Wheel/CSP: I genuinely want to own the stock at the put strike, with cash set aside.

🟢 Volatility / event (straddle, strangle, earnings calendar/condor)

[ ] Verified the exact event date/time (before or after market close).
[ ] Computed the expected move (≈ ATM straddle) and my thesis beats it (long: move > implied; short: move < implied).
[ ] Checked term structure (front-month richness) so I’m not buying the most-crushed contract.
[ ] Decided hold through vs close before the event, in advance.
[ ] Long premium sized to survive a total loss; short/defined sized for the gap.

🟢 Hedging (protective put, collar, index put hedge)

[ ] I know exactly what I’m protecting (which shares / what portfolio value).
[ ] Hedge is beta-weighted and sized to the exposure (contract count math done).
[ ] I’ve accepted the cost (premium / capped upside) vs the protection bought.
[ ] I have a rule to monetize the hedge into a spike rather than round-trip it.

The 30-second sanity check (when you think you’re done)

Before you click, say these out loud:

“My thesis is ____, I’m wrong if ____.”
“My max loss is $____, which is ___% of my account.”
“I take profit at ____ and I exit/defend at ____.”
“IVR is ____, so I am correctly a [buyer/seller] of premium.”
“There is no surprise event before my expiry.”

If you can’t fill in every blank instantly, you’re not ready to place the trade.

Post-entry checklist (right after the fill)

[ ] Logged the trade in journal-and-review.md (thesis, tags, IVR, size, max loss, targets).
[ ] Placed the GTC profit-take order.
[ ] Set price alerts at the defense/stop level.
[ ] Set a calendar reminder for 21 DTE (short premium) or my decision date.
[ ] Updated my aggregate portfolio risk tally.

Order placed and logged? Manage it per ref-management-adjustments.md. Facing a specific situation? → 06-playbooks.md.