A defined-risk short vertical as a single testable procedure

A paired credit structure with a defined loss

A short vertical credit spread is an option spread: a paired long and short option position used as one procedure rather than two separate trades. It is built by selling an out-of-the-money option and buying a further out-of-the-money option of the same type.

That purchase replaces the unlimited risk of a naked write with a defined maximum loss. Profit on the structure is limited to the net credit received, and the maximum loss is typically larger than that credit.

A vertical debit spread is a same-expiration long and short strike pair that pays a net debit and therefore caps both gain and loss. The archive case is separate: it collects a net credit on the short vertical described above, so the cap on profit is that credit while the loss remains defined.

Rank implied volatility first

Relative volatility is formed by ranking current at-the-money implied volatility against the prior two-year high-low range on a 1-to-10 scale. Writing is reserved for ranks of 6 or higher.

Apply the entry checklist

The documented entry checklist also requires fewer than 45 days to expiration, a sold-option delta of 35 or less, and a market state that favors the chosen side of the spread.

A further positive filter is a sold option whose implied volatility is sharply higher than that of the purchased option, described as a 20% or greater gap.

Add a profit rule and a stop-loss

A stop-loss is a precommitted exit that bounds loss or exposure before the trade is placed and while it is open. Durable use of the structure depends on pairing the selection advantages with predetermined profit-taking and stop-loss levels and then following that plan on each trade.

Editorial view: abstention belongs to the same procedure. If the rank, the checklist, or the precommitted exits are missing, the archive workflow does not treat time decay as available.