What is Layered Options? What kind of trades are they?
Quick answerOne trade every Thursday at about 3 PM Eastern: a call debit spread (a call vertical) on the strongest of SPY, QQQ, IWM and DIA, about 36 days out, with a Good Till Canceled target that closes it for you. You buy options; you never sell one naked.
The details
The trade
- The market: the strongest of SPY, QQQ, IWM and DIA over the last 5 trading days.
- The expiry: the first Friday at least 30 days out (36 days from a Thursday).
- The strikes: the first 1-dollar-wide call spread above the price: buy the call just above it, sell the next one up, as one ticket.
- The price: a debit of around the two legs' live middle prices at about 3 PM ET.
- The exit: a GTC limit to close at the debit × 1.25 (the GTC target).
Why "layered"
A new trade comes every Thursday while earlier ones are still open, so they stack: layer on layer, each closing on its own GTC.
It is a defined-risk trade: the most you can lose is what you paid (risk and size).
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