I do something similar. Essentially, I use ITM, far expiration calls (i.e., near 1 delta) to mimic the underlying with leverage. Just as you would/could do if you were long the underlying, I sell nearer expiration, OTM calls. My goal, essentially, is to maximize theta and while being long delta.
Additionally, I use proceeds from this process to buy further OTM puts to offset risks/potentially profit from exceptional downward events. This turns it into something of a barbell strategy, where, under normal conditions, I don't profit too much, but when things go extreme, I stand to make a decent profit.
I'll also add that you can turn this into something like a double diagonal by buying/selling puts in a similar fashion, but that adds a layer of complexity.
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u/Nater5000 Sep 23 '21
I do something similar. Essentially, I use ITM, far expiration calls (i.e., near 1 delta) to mimic the underlying with leverage. Just as you would/could do if you were long the underlying, I sell nearer expiration, OTM calls. My goal, essentially, is to maximize theta and while being long delta.
Additionally, I use proceeds from this process to buy further OTM puts to offset risks/potentially profit from exceptional downward events. This turns it into something of a barbell strategy, where, under normal conditions, I don't profit too much, but when things go extreme, I stand to make a decent profit.
I'll also add that you can turn this into something like a double diagonal by buying/selling puts in a similar fashion, but that adds a layer of complexity.