Case Studies
24 · Case Studies
This is the applied division. Every other section of the guide isolates a single
idea — a Greek, a strike-selection rule, a management trigger. Real trades are messier:
they braid those ideas together across a 45-day arc, force decisions when price moves
against you, and reward the trader who already rehearsed the next step. The case studies
here are worked, end-to-end narratives — a single position carried from entry filter
through management, defense, and exit — so you can watch the mechanics interact instead of
reading them one at a time.
Treat these as dramatizations of the mechanics, not trade recommendations. The
numbers (deltas, DTE, credits, profit targets) are illustrative and chosen to match the
house defaults documented elsewhere in this guide; outcomes are written to teach the
decision tree, not to imply any expected return. Each study leans on the same evidence base
as the strategy sections: enter in elevated IV, structure around delta, manage winners
early, and respect the ~21-DTE gamma checkpoint.
Read these after the mechanics that underpin them: 05_trade_management
(the 50% / 21-DTE rules), 07_short_premium (why we sell),
09_strangles, 10_iron_condors,
21_trade_adjustments (rolling and defense), and
03_implied_volatility (the IV-Rank entry filter). When a study
exposes a recurring error, it cross-links to 25_common_mistakes.
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Studies in this division
How the four connect
These are four faces of one philosophy: **sell rich premium, define management in advance,
and let probability and theta do the work.**
- The strangle lifecycle is the canonical undefined-risk premium sale; the
iron condor is that same neutral thesis with long wings bolted on to cap the loss
(compare 09_strangles vs 10_iron_condors).
- The wheel swaps the neutral stance for a willingness-to-own stance, but it's still a
short put collecting credit and decaying with time
(07_short_premium).
- The earnings study isolates the vega leg: a short strangle held across a binary event
so the volatility collapse — not the price drift — pays you. IV inflates sharply into an
announcement (in the worked example, IVx rising from ~26.8% to ~38%) then crushes
once the result is known.
Across all four, the mechanical spine is identical and is documented in
05_trade_management: manage winners at roughly **50% of max
profit, and use ~21 DTE** as the checkpoint to close or roll before gamma risk
accelerates near expiration.
A note on grading: the worked numbers in these files trace to published industry research
studies (managing winners, rolling strangles, post-earnings volatility contraction). Those
studies are the original Grade A evidence, but their episode pages did not resolve to a
verifiable fetch at build time, so study-specific figures are tagged conservatively; the
mechanical rules are corroborated by the permanently published Learn pages cited below.
Related
05_trade_management · 07_short_premium · 09_strangles · 10_iron_condors · 21_trade_adjustments · 25_common_mistakes
Sources
Verified-resolving (fetched at build time) — Grade A:
- options education — Iron Condor Strategy Guide: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document — 50%-of-credit target, untested-side close, rolling the tested spread, max loss = width − credit, breakevens.
- options education — Straddle vs. Strangle: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document — short-strangle strike selection, theta/IV-contraction edge, closing early to avoid pin/gamma risk.
- options education — What is a Covered Call: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document — selling OTM calls against 100 shares, assignment ITM by ≥ $0.01, capped upside.
- options education — How to Sell Puts: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document — cash-secured put, assignment to 100 shares, effective cost basis = strike − credit.
- options education (Greeks) — Vega: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document — short-vega edge; earnings IV inflation example (IVx ~26.8% → ~38%) and post-event crush.
Original studies (real, but episode pages did not resolve to fetch at build time) — Grade A · Conf Med:
- industry research — Managing Winners: Varying Deltas (SPY strangles, 2005–2017): https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document
- industry research — Why We Roll Strangles: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document
- industry research — Post Earnings | Volatility Contraction: https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document
_Evidence-labeled per the Project Charter. Education only, not financial advice._