Front DTE: 7-14 days (active) · 30+ days (passive — wider tent, slower theta)
Back DTE: Always front + 3 calendar days (Friday short → Monday long)
Delta target: ~0 at entry (Steve runs ±1-2 acceptable)
IV Rank preference: Below 15 ideal (per Flyagonal parent) · Works any regime but cheaper back-month longs when IV low
Event calendar: AVOID entering with FOMC · CPI · earnings · binary events inside the hold window
Market state: Range-bound or slowly drifting · NOT during strong trend or post-crash rally
💰 Strike & Capital
Iron Fly Wings
±50 pts SPX from ATM
Diagonal Short
~100 pts OTM (50 pts past wing)
Diagonal Long
~120 pts OTM (20 pts past short, in back month)
Max Defined Risk
~$2,600-$3,200 SPX per unit
Buying Power
~$3,500-$4,000 SPX (less on PM)
Typical Net
Small credit to small debit at entry
📋 Order Sequence
Order 1 — Iron Butterfly (4 legs · single ticket): SELL ATM call · SELL ATM put · BUY upper wing call · BUY lower wing put · all front month · expects CREDIT
Order 2 — Double Diagonal (4 legs · single ticket): SELL upper short call front · BUY upper long call back · SELL lower short put front · BUY lower long put back · expects small DEBIT
Always LIMIT orders — SPX bid-ask widens fast; never use market orders
Wait 5-10s between orders — let broker recompute margin before firing the second
📤 Profit Taking
Day 0 / Day 1: Exit at 5-7% of risk capital (~$130-$200 on $2,627 risk)
Day 2+: Exit at 10-15% of risk capital (~$265-$395 on $2,627 risk)
Hard time exit: 7 DTE on front month — close all regardless of P&L (avoid gamma zone)
Average hold: ~4 days (Steve's self-reported avg across ~50 FlyD trades)
Discipline: Targets are RULES not suggestions · close at target, recycle capital
🔄 Adjustment Rules
No mechanical stops — defined risk IS the stop; bid-ask blows out in fast moves making stops execute terribly
DOWNSIDE move: Roll short CALLS down — buy back current shorts, sell new ones closer to spot. Collects premium, tilts tent lower.
DOWNSIDE follow-up: If front IV > back IV (backwardation), ADD a new put diagonal below current spot. Trigger = backwardation, NOT raw price move.
UPSIDE move: Roll short PUTS up — same logic, mirror. Harder execution; less premium available because vol drops with rallies.
Decision criterion: When modeling adjustments, pick the option that "keeps theta high and minimizes added BP/risk"
Adjustment trigger (derived): Position delta breaches ±5 OR price moves outside the front-month iron fly wings (±50pt)
Whipsaw scenario: If you've adjusted for a drop and the market rips back through — close the trade, take the loss. Do not try to re-adjust mid-whipsaw.
🛑 Stops & Guardrails
✘ Worst-case scenario is WHIPSAW (sharp drop → adjust → reversal back through new tent). Steve admits to ~7 such events in 20 years.
✘ Largest stress-event loss on parent Flyagonal: $4,500 during the August 2024 SPX 100-point crash
✘ Sample size: Steve's 50 FlyDagonal trades happened in a low-vol bull regime. Win rate has NOT been tested through a real bear market.
✘ Family ancestor backtests (Deltaray Rhino 2018-2025): Sharpe 1.12, CAGR 3.15% — far below Steve's marketed numbers
Trend filter: QQQ must close above its 190-day SMA · no entry if below
Note on trend filter: Scanner uses 200 EMA as functional proxy for 190 SMA — same trend signal, 200 EMA reacts ~2% faster
Frequency: 2 spreads per trading day, Monday-Friday (Joe's published cadence)
Avoid entries: 2 days before FOMC, CPI, or major mega-cap earnings
💰 Strike & Capital
Short Strike
~37 delta · ~3-4% OTM
Long Strike
$5 below short
Max Risk
$500 per spread minus credit
Typical Credit
~$100-150 per spread
📤 Profit Taking & Time Exits
50% max profit (optional early scale): Standard tastytrade rule — close at 50% of max credit if reached early
21 DTE decision point: If unprofitable AND in-the-money — close (mandatory). If still OTM and profitable — optional hold to 14 DTE for more theta decay
14 DTE hard close: Mandatory close at 14 DTE regardless of P&L
Author preference: Take profits early when offered — don't grind to expiration
🔄 Defensive Iron Condor (if challenged)
⚠ Investor Claude additions — not in Joe's published rules. Joe demonstrated defensive conversions in companion case studies but did not formalize entry triggers, strike rules, or time windows. These are the rules we use in this system.
Entry trigger (ALL must be true): Spot is within 1% above the short put strike · trade is at day 17 or earlier (≥25 DTE remaining)
Strike selection: Call short = 20-35 delta on same expiration as put spread (user picks based on conditions · lower delta = more conservative)
Width: Call long = $5 above call short (same width as put spread)
Contracts: Same number of call spreads as put spreads · same expiration
Holding period: Ideally 7-21+ days for theta to deliver value · Joe's 1-day demos in video were proof-of-concept only
Result is the same Iron Condor either way — Iron Butterfly variant not used in this system (Joe's published material describes a same-strike butterfly variant; our rules require spot above the put short to fix, so there is always a gap between shorts — i.e., always a Condor)
🚫 When NOT to Fix
Spot at or below the put short strike — close the spread to avoid assignment, NEVER add the fix
Day 18+ into the trade — not enough theta runway for the fix to work, wait it out or close on breach
VIX spiking 20%+ in 1-3 days — IV expansion will hurt the added call side, fix becomes a delta bet not a theta bet
Already converted this spread once — no double-fixes, if the first fix didn't save it the second won't either
Position is already past your account loss tolerance — adding contracts to a losing position is martingale behavior, take the loss
🛑 Stops & Guardrails
EOD close below short strike → close entire position at next open (Joe's published breach rule · matches SPX 7DTE basis)
QQQ closes below 200 EMA → stop opening new spreads immediately, manage existing only (Investor Claude addition)
VIX above 30 → no new entries, manage existing only (Investor Claude addition)
VIX 25-30 → half size on new entries (Investor Claude addition)
35-40 delta is aggressive — reward-to-risk is worse than 1:2, trend filter is critical to make this work
Confirm the LEAPS is in place (~80 delta) before selling any call against it
Sell the weekly call at the ~70 delta strike clearing the $5 extrinsic floor
Immediately place the GTC buy-to-close at the 80%-extrinsic price (the card computes it) — exits handled BEFORE you walk away
Always LIMIT orders — ITM call spreads can be wide; never market orders
📤 Profit Taking / Roll
PRIMARY (most important rule): buy back / roll the short call when 80% of its EXTRINSIC has decayed — banks the income AND keeps you out of the assignment danger zone
Why 80% of extrinsic (not total): a short ITM call is only assigned when its time value is near zero. Exiting at 80% extrinsic decay means meaningful time value still remains → assignment stays irrational for the counterparty
GTC price example: sold for $17 ($6 extrinsic). 80% capture = bank $4.80. Buy back at ~$12.20 ($11 intrinsic + $1.20 leftover extrinsic). NOT $11 — that is zero extrinsic and full assignment risk
Ex-dividend watch: assignment risk spikes near QQQ ex-div dates as extrinsic thins — roll before, not after
Repeat weekly — sell the next call, place the next GTC, harvest extrinsic
🔄 LEAPS Handling (Roll-Forever)
Roll the LEAPS at ~90 DTE — before theta accelerates on the long leg (≈ every 6-9 months depending on the expiry bought)
NEVER close the LEAPS at a stop — if underwater, roll it OUT (toward ~12 months) and keep it alive
Committed capital: you hold and roll until the position returns to profit, even if it takes 2 years, collecting premium the whole way
Roll cost is real: extending an underwater LEAPS costs time premium + spread + commissions — the weekly extrinsic must exceed this drag for the thesis to net positive
🛑 Stops & Guardrails
✘ THE RECOVERY RULE (most important): if the LEAPS is underwater, NEVER sell a short call below your LEAPS break-even strike. Selling below it caps off your own recovery — death by a thousand capped rallies. Accept less premium to protect the climb back
✘ NO hard price stop on the LEAPS by design — POSITION SIZE is the only real stop. Never hold more than you can carry through a 2-year drawdown
✘ Weekly UPSIDE is capped: the short call you sold becomes a loss as the underlying rallies above your short strike. On a fast up-move you trail buy-and-hold. This is an INCOME trade, not a growth trade
✘ Downside buffer ≈ 3% weekly (the premium cushions the LEAPS decline). Break-even ≈ 3% below spot. ~85% of weeks historically stay within 3% — meaning ~15% (≈8 weeks/yr) do NOT
✘ The "153% / year" figure is an INCOME ceiling assuming you hit the weekly target with NO losing weeks. It is not a realistic expectation — treat it as marketing, not a forecast
✘ Income (extrinsic) is uncapped over time; directional upside (LEAPS appreciation) is capped each week by the short call. Hold both facts at once
✘ STILL TO DEFINE: exact LEAPS expiry to buy (sets roll cadence) · stress-roll plan for the short call when it runs hard against you on a fast rally
⏳ Time Flies (5-Leg Delta-Neutral Weekly)
Simon Black · Theta Profits · 3-yr self-reported track record · delta-neutral, look-once-a-day weekly
NEUTRALRisk: 4-5/10 (defined)Target: 10-20% of BP · ~6 day hold⏳ Discretionary curve-shaping
🧩 Structure (5 Legs)
Below spot — Put Diagonal: SHORT put ~2.5% below spot (front week) · LONG put one strike further out (back week)
Above spot — Call Broken-Wing Butterfly: LONG near call · SHORT body call ×2 · LONG far call (front week)
Broken wing: far call wing is WIDER than the near wing — deliberately skews risk away from the upside
Concept: diagonal below benefits from a vol spike on a selloff; butterfly above benefits from vol contraction on a drift up
Expiries: short legs front week · diagonal long leg the following week (~7 days out)
📥 Entry Rules
Underlyings: Any liquid index/ETF — Black favors RUT/IWM · also SPX · QQQ · cash-settled preferred (no assignment)
Front DTE: 7 minimum (hard floor) · 8 ideal · up to 14 — the 7-14 window gives similar results
Back DTE: diagonal long leg one week beyond the short (~+7 days)
Delta target: ~0 at entry (delta-neutral) — he does not predict direction
Strike distance: VIX-scaled — ~2.2-2.3% either side near VIX 15-17 · widen to ~3% near VIX 20-25
Event calendar: avoid FOMC · CPI · earnings landing inside the hold window
Curve check: aim for a smooth, round profit curve in OptionStrat before entering — sag means strikes are too far out
💰 Strike & Capital
Put Diag Short
~2.5% below spot (front)
Put Diag Long
~1% further OTM (back week)
BWB Body
~2.5% above spot (short ×2)
BWB Wings
near ~1% · far ~1.5% (broken)
Allocation
~$3,000 per contract
Recommended strikes
Starting frame — tune in OptionStrat
📋 Order Sequence
Paste the recommended strikes to notepad / PDF, then model in OptionStrat
Shape the curve — adjust butterfly widths until the profit tent is smooth and round either side of spot
Build as two structures: put diagonal (sell front / buy back) + call broken-wing butterfly (front week)
Always LIMIT orders — index spreads widen fast; never market orders
📤 Profit Taking
Primary target: 10% of buying power — take it and recycle capital
Stretch: 10-20% if price stays centered earlier in the week
Hard exit: 24 hours before expiry (end of Thursday for Friday) — non-negotiable
Average hold: ~6 days (less than a week)
Discipline: take the money when it's there — the curve can flip overnight near expiry
🔄 Adjustment Rules
Defense, not offense: adjustments minimize losses — they rarely create wins (~15-20% of trades adjusted)
DOWNSIDE move: add a put calendar/diagonal below spot for more room — triggered by a real move, usually the day after entry
UPSIDE move: add a call calendar/diagonal above to give the trade a target (counterintuitive but vol has usually already dropped)
Timing: adjust early (day after entry) — late in the week the ship has sailed, just take the small loss
Cost awareness: every adjustment adds debit and lowers the profit ceiling if the move reverses
Whipsaw: if you adjust for a drop and price rips back through — close it, take the loss, don't re-adjust mid-whipsaw
Skill level: manual calendars/diagonals — intermediate-to-advanced, not a beginner adjustment toolkit
🛑 Stops & Guardrails
✘ Defined risk IS the stop — known max loss at entry (~$1,000-1,300 per contract on index size)
✘ Main failure mode: a big directional move either way (delta-neutral trade, wrong trade when the market runs)
✘ Secondary failure mode: vol crush after an artificial IV spike (news in/out)
✘ Worst self-reported loss: ~40% (2024 post-election); typical losses ~20% of buying power
✘ This is a DISCRETIONARY curve-shaping trade — the author states it cannot be fully mechanized; recommended strikes are a starting frame only
✘ Allocate ~$3,000 per contract; never risk the full max loss on a single trade
✘ Requires diagonal + butterfly familiarity — model in OptionStrat and verify the curve before committing capital
✘ WATCH NET THETA on high-priced underlyings (SPX): the call butterfly near-wing can land too close to spot, flipping the trade to a negative-theta debit. If theta is negative, widen the near-wing in OptionStrat until it turns positive. QQQ/IWM usually fine.