Educational use only — not investment advice. See full disclaimer in README.md.
The matrix in 02-strategy-selector.md handles the general case. This file handles the specific, recurring situations where you want a pre-decided answer instead of thinking from scratch under pressure. Find the scenario that matches today, and follow it.
Each playbook gives: the setup → the read → candidate plays → what to avoid → manage.
Index of playbooks
- A. Calm uptrend (low VIX grind higher)
- B. Calm range / chop
- C. Sharp selloff / spike in VIX (panic)
- D. Post-panic / falling VIX (vol mean-reversion)
- E. Earnings on a single name
- F. FOMC / CPI / Jobs (macro event)
- G. Overextended rally (melt-up / chase risk)
- H. Bounce off major support (oversold reversal)
- I. Breakout from a range / coil
- J. I own stock and I’m nervous (need a hedge)
- K. I want recurring income on a name I like
- L. Assigned overnight (now I hold shares / short shares)
- M. Nothing fits (the no-trade day)
A. Calm uptrend — low VIX, grinding higher
Read: Direction bullish · IVR usually low · no catalyst. SPY/QQQ above rising MAs, VIX < 15. Candidate plays:
- Bull call (debit) spread — the workhorse; cheap because IV is low, defined risk. → strat-bullish.md
- PMCC if you want longer-term stock-replacement exposure.
- Long call only with strong conviction and an extra-clean setup (theta bleed is the enemy in calm markets).
- If you must sell: bull put spreads work but credits are thin in low IVR — accept the lower return or pass. Avoid: selling rich premium that isn’t there; fighting the trend with bearish bets (“it’s gone up too much” is not a thesis). Manage: take profits into the move (don’t hold debit spreads to expiry hoping for max); trail your stop up under support.
B. Calm range / chop — bounded, directionless
Read: Direction neutral · IVR mid-to-high preferred · no catalyst. Price ping-ponging between clear support and resistance. Candidate plays:
- Iron condor (defined) — short strikes outside the range, ideally outside the expected move. The bread-and-butter range trade. → strat-neutral-income.md
- Iron fly if price keeps pinning a central level (more credit, narrower profit zone).
- Short strangle (L4, undefined) for more credit if approved and sized tiny.
- Calendar / double calendar if IVR is low (you want long vega, not short). Avoid: condors when IVR is low (premium too thin for the pin risk → use calendars instead); setting short strikes inside the range. Manage: 50–75% profit target on the condor; roll the untested side toward price for more credit; manage by 21 DTE; if price breaks the range decisively, the thesis is dead — defend the tested side or close per ref-management-adjustments.md.
C. Sharp selloff / VIX spike — panic day
Read: Direction bearish/uncertain · IVR very high (>70), VIX 30+, term structure often inverted (backwardation). Premium is rich but realized moves are violent. Candidate plays (size DOWN — ⅓ to ½ normal):
- Bull put spread / CSP if price is at strong support and you want to fade the panic — you’re selling fear-inflated premium, and IV reversion is a tailwind. Defined-risk strongly preferred.
- Sell into the IV, don’t buy it: avoid buying long puts after the spike — you’re paying peak IV and will get crushed on the snap-back.
- If you’re already long a hedge → this is when you monetize it (see J). Avoid: catching a falling knife with naked short puts at full size; buying expensive premium chasing the move down; revenge-trading the red. Manage: smaller size, wider strikes, faster profit-taking; expect whipsaw. Respect that BP requirements rise in a spike — keep buffer.
D. Post-panic / falling VIX — vol mean-reversion
Read: The selloff has stabilized; VIX rolling over from a spike; IVR still elevated but falling. One of the highest-expectancy regimes for premium sellers. Candidate plays:
- Iron condor / short strangle — sell the still-rich premium as IV reverts down; falling vega works for you on top of theta.
- Bull put spread if a bottom looks in and you want a directional lean with the IV tailwind.
- Ratio/backspreads unwind — if you bought convex downside cheaply before, harvest it now. Avoid: assuming the panic is fully over (it can re-spike); going back to full size too early. Manage: standard premium-selling management; this regime rewards patience and mechanical profit-taking.
E. Earnings on a single name
Read: Catalyst = earnings. Front-month IV is jacked up; expect a crush right after. Step 1: compute the expected move ≈ ATM straddle price. That’s the bar. Candidate plays (pick by thesis):
| Thesis | Play | Notes |
|---|---|---|
| Move > priced-in (direction unknown) | Long straddle/strangle | Must clear the expected move and the crush to win; hardest path |
| Move < priced-in / stays near here | Iron condor / iron fly around the expected move | Defined-risk crush harvest |
| Stays near a level, low back-month IV | Calendar at the ATM strike | Sell the rich front, own the cheaper back |
| Directional lean + want crush help | Credit spread (bull put / bear call) outside the expected move | Lean + sell rich IV |
| No edge | Stand down, or trade after the crush | Most long-premium earnings buys lose |
Avoid: buying cheap-looking long options the day before earnings (you’re buying peak IV → crush); holding undefined-risk short premium through the print unless that’s the deliberate, gap-sized plan. Manage: decide before the event whether you hold through or close; long premium → exit into the IV ramp or right after the move; short premium → the crush is usually captured within a day, take it. → full detail in strat-volatility-event.md.
F. FOMC / CPI / Jobs / PCE — macro event
Read: Catalyst = macro; affects the whole market. Index IV elevates into it, relaxes after. Binary, fast, market-wide. Candidate plays:
- Reduce size; prefer defined risk. A market-wide gap hits every correlated position at once.
- Wait until after the print is often the best play — uncertainty resolves and pricing normalizes within hours, then the matrix applies cleanly.
- If trading it: defined-risk structures (iron condor on the index for a “priced-in, no surprise” view; a debit spread for a directional lean) sized for the gap. Avoid: loading undefined-risk short premium across correlated names into the event; oversizing because “it’ll probably be fine.” Manage: if holding through, pre-decide your post-print action; tighten risk on the whole book, not just the new trade; watch beta-weighted delta — your aggregate directional bet is what’s exposed.
G. Overextended rally — melt-up / chase risk
Read: Direction up but stretched (far above MAs, RSI hot, parabolic). Tempting to chase, dangerous to short. Candidate plays:
- Don’t chase with naked long calls. If bullish, use a defined bull call spread so an air-pocket pullback doesn’t gut you.
- Bull put spread below support to stay long-biased with a buffer, if IVR supports it.
- Don’t short a strong trend outright. If you must express caution, a small defined bear call spread far above price (in high IVR) or simply take profits / hedge existing longs (see J). Avoid: picking the top with naked shorts; “it has to pull back” sizing. Manage: tight, take profits fast, respect that overextended can stay overextended.
H. Bounce off major support — oversold reversal attempt
Read: Price hitting a well-tested support with signs of stabilizing; often IVR elevated from the drop. Candidate plays:
- Bull put spread / CSP with short strike at or below support — high-probability, and you’re selling the elevated IV. → strat-bullish.md / strat-neutral-income.md
- Bull call spread for a cleaner directional play if you want defined upside and IVR isn’t extreme.
- Risk reversal (long call / short put) if very bullish and L4/CSP-capable — but the short put is the risk; mind it. Avoid: assuming the bounce is real before confirmation; full size on the first touch. Manage: “wrong if” = a decisive close below support → defend or close; take the credit-trade profit at 50%.
I. Breakout from a range / coil
Read: Price escaping a long consolidation on volume; often IVR was low during the coil (cheap premium) and expands on the break. Candidate plays:
- Debit spread in the breakout direction — low pre-break IV makes long premium affordable, and you want to be long the move and the vol expansion. → strat-bullish.md / strat-bearish.md
- Long option / backspread if the breakout could be explosive and IV was cheap.
- Calendar/straddle before the break if you anticipate a move but not the direction. Avoid: selling premium right as IV is about to expand against you; fading a clean breakout. Manage: take profits into the impulse; a failed breakout (back into the range) is your exit.
J. I own stock and I’m nervous — need protection
Read: Goal = hedge. You hold shares/ETFs and want to cap downside over some horizon. → strat-hedging.md Candidate plays:
- Protective put — clean insurance; costs premium (cheapest when IVR is low — hedge before the fear, not during).
- Collar — finance the put by selling an upside call; cheap/zero-cost protection, capped upside.
- Put-spread collar — even cheaper, but protection floors out below the lower put.
- Index put hedge (SPX) — beta-weight the whole portfolio and buy one efficient hedge (do the contract-count math in strat-hedging.md). Avoid: buying puts at peak panic IV (expensive — prefer spreads/collars then); over-hedging; never monetizing. Manage: monetize into a spike — when the market drops and your put balloons, roll it down/out and bank the gain rather than round-tripping it back to zero.
K. I want recurring income on a name I’d happily own
Read: Goal = income; you like a stock long-term and want to get paid while positioning. → the Wheel in strat-neutral-income.md Candidate plays:
- Cash-secured put at a strike you’d happily buy at (≈16–30Δ, 30–45 DTE). Collect premium; if assigned, you own it at a discount.
- → assigned → Covered call above your cost basis. Collect premium; if called away, you booked a gain + premium. Repeat = the Wheel. Avoid: running the Wheel on names you don’t actually want to own (the premium won’t save you in a real decline); selling calls below your cost basis and capping losses into a gain you didn’t want. Manage: 50% profit-take on the CSP; roll for a credit if tested but only if you still want the shares; mind ex-dividend assignment risk on covered calls.
L. Assigned overnight — now I hold shares (or am short shares)
Read: A short option was assigned (common on short ITM puts, or short ITM calls near ex-dividend). You wake up to a stock position. Don’t panic — this is mechanical. If assigned on a short PUT (now long shares):
- This was the plan if it was a CSP/Wheel → start selling covered calls (see K).
- If it was one leg of a spread → your long put still protects you; you can exercise it, or sell the shares and the long put together to close at your defined max loss. Don’t leave the long leg naked unintentionally. If assigned on a short CALL (now short shares):
- Buy to close the short stock, or deliver shares you own (covered call → your shares are called away, you’re done).
- Spread leg → your long call caps the loss; close the package. Avoid: carrying an unexpected, unhedged stock position; ignoring the margin/BP hit of the shares. Manage: full assignment playbook in ref-management-adjustments.md §9.
M. Nothing fits — the no-trade day
Read: Tags are muddy (no clean direction and no clear vol edge), or the selector points only to things you can’t trade / illiquid names, or you’re out of risk budget, or you’re not in a clear headspace. The play: Do nothing. Manage existing positions, update your journal, set alerts, study. Cash is a position. Why this is in the playbook: the no-trade day is the most underrated professional skill. Forcing trades on edgeless days is how good months become bad ones. The market is open ~250 days a year — you do not need to trade today.
How to use this file
When something specific is happening, come here first — the playbook will either hand you a plan or send you to the right strategy/reference file with the context already framed. When nothing specific is happening, the 02-strategy-selector.md matrix is your default.
Back to the loop: 00-daily-workflow.md. Manage open trades: ref-management-adjustments.md.
Power and Pelf 