Decision Trees
Companion Document to the Foundations Guide
ThetaTracker Pro
If This, Then That
Ten decision trees plus a Premium Dynamics reference panel — use these in real time while the market is open
10Decision Trees
3Departments
30/30Min Daily Routine
∞Scenarios Covered
TREE 1
The Morning Routine — First 30 Minutes
Run this every morning before placing any trades
1
Read ALL of your notes and alerts — twice
First pass: get the big picture. What is the plan today and why? Second pass: identify every specific trade with a strike, expiration, and credit target.
⚠️ Do not place any trades before completing both reads
2
Check: Does anything expire TODAY?
- Short put expiring today → Flag for 3:30pm roll. Do NOT roll in the morning.
- Short call / IC expiring today → Check if GTC close already triggered. If not, flag for 3:30pm management.
- Long put within 30 DTE → Plan roll soon. Protect BP this week.
3
Check Portfolio Delta
If Delta
Within ±150
→
Then
✅ Balanced. Proceed normally. Theta is working.
If Delta
±150 to ±300
→
Then
⚠️ Monitor. Note it. Watch for opportunity to rebalance through today's roll.
If Delta
±300 to ±500
→
Then
⚠️ Caution. Today's roll should aim to move delta back toward neutral.
If Delta
Beyond ±500
→
Then
🚨 Act today. See Tree 6 — Emergency Protocol. Rebalancing is today's primary goal.
PRIORITY
4
Check Buying Power Usage
If BP Used
Under 70%
→
Then
✅ Good runway. Can add trades if edge exists. Proceed normally.
If BP Used
70% – 80%
→
Then
⚠️ Sweet spot. Add only if today's roll will bring credits in to restore it.
If BP Used
Over 80%
→
Then
🚨 Too aggressive. Do NOT add new trades today. Focus on rolls to bring credits in.
STOP
5
Check: Is this a Daily Income CCS or PCS?
If the trade included
Opening credit AND closing debit target
→
Then
📥 INCOME TRADE by default. Place it. Place GTC close at .65 db immediately after fill — no extra instruction needed. If the trade was planned without a close target, it is a protective trade — no GTC close.
GTC .65 db — AUTOMATIC
If the trade included
Opening credit only — no close target
→
Then
🛡️ PROTECTIVE TRADE. Place it. No GTC close. Manage it by your plan's rules.
NO GTC CLOSE
6
Check: Has an ATH, 3-ATR, or 4.5%-above-50MA trigger fired today?
If any
Protection trigger has fired
→
Then
Add ONE Portfolio Protection contract today. Non-negotiable. See Tree 5 for details.
REQUIRED
If no
Protection trigger has fired
→
Then
✅ No Protection needed today. Continue to step 7.
7
Set your 3:30pm reminder — then step away
You have done what is needed. All GTC orders are placed. All morning flags are noted. The market will do what it does — your theta is earning whether you watch it or not.
✅ Morning routine complete. Next action: 3:30pm roll execution.
The One Rule About Watching the Screen
If the market moves 80+ points intraday, begin monitoring. If it moves 120+ points, active management may be needed. Under 80 points — close the screen and go live your life. That is not avoidance. That is discipline.
The "Do Nothing Day" — A Skill, Not a Failure
Some days the right answer is zero trades. After a run of great gains it is easy to feel invincible, and that is when the market puts you in check quickly. If there is no clear edge, no positions to manage, and the market could go 80 points either direction — do not force a trade. Do nothing, go about your day, and abide by the priorities. The four priorities in order: (1) Preserve capital, (2) Preserve gains, (3) Reduce risk, (4) Maximize gains. Levels 1–3 always come before level 4.
TREE 2
The Roll Decision — Which Direction and Why
Use at 3:30pm when rolling expiring short puts
The Anchor Rule — Always Start Here
99% of the time the roll targets that day's expiration contract. Find your position that matches the EXPIRATION DATE first. The strike is secondary. Whatever you have expiring today — that is what you are rolling.
Step 1 — Determine Your Current Delta Posture
🔴 Heavy Short Delta (Beyond -300)
Your account is leaning too bearish. The portfolio profits too much when the market falls and struggles too much when it rises.
→ You need to ADD long delta through your roll. Roll UP or roll with put spreads to rebalance.
🔵 Neutral Delta (Within ±150)
Your account is well balanced. Theta is your primary income. Daily market moves don't dramatically swing your P&L.
→ Roll based on market conditions and your plan's rules. Usually FLAT or slight adjustment.
🟢 Long Delta (Beyond +200)
Your account is leaning too bullish. The portfolio profits too much when the market rises and struggles too much when it falls.
→ You need to REDUCE long delta. Roll DOWN or add short calls to rebalance.
🟡 Extreme Short Delta (Beyond -500)
This is a red flag situation. The portfolio is dangerously directional. On a strong up day this can cause significant P&L swings.
→ Rolling UP is mandatory. Also see Tree 6 — Emergency Protocol.
Step 2 — Factor in Market Conditions + Choose Your Roll Direction
Market Condition + Delta
Market rallying AND short delta heavy
→
Roll Direction
Roll UP aggressively. Higher strike = more premium collected + adds long delta to rebalance the portfolio. Double win. This is the optimal move on a strong up day when heavily short delta.
ROLL UP
Market Condition + Delta
Market rallying AND delta is neutral
→
Roll Direction
Roll FLAT. Same strike, new expiration. Collect premium, stay balanced. No need to reach for more delta in either direction.
ROLL FLAT
Market Condition + Delta
Market weak/falling AND delta is neutral
→
Roll Direction
Roll DOWN slightly. Lower strike adds safety cushion. Accept slightly less premium in exchange for more protection. Being cautious is smart when market is weak.
ROLL DOWN
Market Condition + Delta
Market weak/falling AND short delta heavy
→
Roll Direction
Roll FLAT. Don't go down further — you already have enough short delta. Flat preserves cushion without adding more bearish exposure.
ROLL FLAT
Market Condition + Delta
Market at ATH, cautious tone
→
Roll Direction
Roll FLAT or slightly DOWN. Don't chase the ATH with more long delta. Be patient. Add Protection if the ATH rule fires. Protection first, income second at all-time highs.
ROLL FLAT / DOWN
Market Condition + Delta
Big down day (100+ pts) — "gift day"
→
Roll Direction
Roll UP aggressively. Elevated premiums from fear. Protection is protecting you. This is exactly when to be bold. "Love this drop." Collect maximum credit while you can.
ROLL UP — BE BOLD
Step 3 — What About the Long Put?
If Long Put
Has 30+ DTE remaining
→
Then
Leave it alone today. Only touch the short put roll. The long put is still doing its job.
LEAVE IT
If Long Put
Is within 30 DTE
→
Then
Plan the roll this week. This is a net debit purchase — make sure BP is available. Follow your plan's rules for rolling the long.
PLAN NOW
If Long Put
Is very far OTM (market moved way up)
→
Then
Opportunistically roll it UP in strike while it is cheap. This is worth doing when the market rips higher and OTM long puts can be upgraded for minimal cost.
OPPORTUNISTIC ROLL
Remember: No Long Put Belongs to Any Short Put
Long puts and short puts are independent inventory. You can roll the short without touching the long. You can upgrade the long without touching the short. They are managed separately based on their own needs.
TREE 3
Income or Hedge? — Every Vertical Spread Classified
Run this decision every time you consider a call spread, put spread, or iron condor
The Single Most Important Question
Did your plan set a specific closing debit price for this trade before you opened it? That one question determines everything that follows.
The Classification Test
Signal 1
Daily Income CCS or PCS — no special instruction needed
→
Classification
📥 INCOME TRADE — default for all Daily Income CCS and PCS. Place it. Place GTC close at .65 db immediately after fill — no extra instruction needed. Only treat a trade as protective when your plan says so before you open it.
INCOME — GTC .65 db AUTOMATIC
Signal 2
Your plan names delta, portfolio balance or protection as the reason for the trade, or sets a minimum credit — and no close target
→
Classification
🛡️ HEDGE. Place it if appropriate for your account. No GTC close. This position is held and managed — either rolled if threatened or left to expire worthless.
HEDGE — NO GTC
Signal 3
The trade is there for delta management or for buying-power reasons specific to your account size
→
Classification
⚠️ EVALUATE FIRST. Some trades only make sense if YOUR delta is skewed. Check your own delta before placing. If your delta is balanced, this trade may not be right for you today.
CHECK YOUR DELTA
What Happens Next — The Two Paths
📥 Path A — Income Trade Works as Planned
The market stays within range. Time passes. The spread decays toward zero.
- GTC close triggers automatically at your target
- You collect 50–65% of maximum possible profit
- Position closes — done
- No further management needed
Result: "Win a little" — clean income collected efficiently
⚡ Path B — Income Trade Gets Breached
The market moves through your sold strike. The GTC close doesn't trigger.
- The trade is now under pressure
- Your Weekly Income sets are likely profiting from the same move
- Cancel the GTC close order
- Follow your plan's roll rules
- Roll further out in time, up in strike for credit
Result: "Win a lot" — Weekly Income sets profit, trade converts to free hedge
The GTC Close Order — Getting It Right
1
Wait for confirmation that your OPENING order has filled
Do not place the GTC close until you have a fill confirmation on the opening trade. Placing a close on an unfilled opening order creates problems.
2
Immediately place the GTC close at .65 db
The close is a BTC (Buy to Close) order at .65 db. Set it as GTC so it stays open until filled. Do not use a day order — it needs to be able to fill on future days too. For Daily Income CCS and PCS this is always .65 db — it is a standing rule, so there is nothing to wait for.
3
Step away — the GTC order works on its own
Once placed, the GTC order will trigger automatically. This is the core benefit — systematic execution without needing to watch the screen.
✅ If you later decide to manage this specific position differently, cancel the GTC and follow your new decision
The Most Common and Costly Error
Placing a Daily Income CCS or PCS and then forgetting to place the GTC close at .65 db immediately after fill. Every Daily Income CCS and PCS is an income trade by default — the .65 db GTC close goes on automatically with every fill. Only treat a trade as protective when your plan says so before you open it.
The 50-Cent Rule — When You Miss the Morning Trade
If Credit
Within 50 cents of your planned credit
→
Action
You can still enter — but do NOT put on the full lot size. Enter at 40–50% of your normal size. If the price recovers back toward your planned credit, add the remaining 50–60% at the better price.
HALF SIZE ENTRY
If Credit
More than 50 cents below your planned credit
→
Action
The trade has already moved. Skip it entirely or wait for a better entry. The risk/reward at this point is no longer favorable. Do not chase.
SKIP
If Price
Keeps dropping after your half-size entry (e.g. to $1.30)
→
Action
Do not add more size. Accept the partial position at the price you got. The move has happened and adding at a worse price compounds the risk without improving the credit profile.
HOLD — DON'T ADD
Rule of Thumb
Stay within 50 cents of your planned price. If you're within that window but the price has dropped — get in at half size. Let it recover, then add the rest. Don't put your whole risk on a trade that has already moved 50 cents against your entry.
Iron Condor — One Close vs. Split Close
Default
Market is calm, normal daily range
→
Close As
One 4-leg order. Put the IC on together, take it off together. One GTC close order covering all four legs at the combined debit target.
4-LEG CLOSE
High Volatility
Large intraday swings (80–100+ points), market reversing sharply
→
Close As
Two separate GTC close orders — one for the call side, one for the put side. On a big swing day, one side may hit 70% profit while the other hasn't moved. Close the winning side immediately to remove that risk. Manage the remaining side independently. Can result in a double exit on the same day.
SPLIT CLOSE
TREE 4
Breach Management — A Position Has Gone ITM
Stay calm. A breach is not a loss. It is a change of role.
First: Breathe. A Breach Is Not an Emergency.
A breached income trade simply means the market moved more than expected. The position is not a loss until you close it at a loss. The system is designed specifically for this moment. Follow the tree below.
Step 1 — Identify What Got Breached
Short CALL spread breached (market rallied)
Your short call strike is now ITM. The spread is losing value.
→ Your short PUTS (Weekly Income sets) are likely at or near max profit right now. The rally that hurt the calls is making the puts very profitable. Net portfolio is likely still positive.
Short PUT spread breached (market dropped)
Your short put strike is now ITM. The spread is losing value.
→ Your Protection and short calls are gaining value. These were placed exactly for this scenario. Check their current value before panicking.
Weekly Income short put breached (market dropped hard)
Your weekly short put is ITM. This is the most serious scenario.
→ This requires rolling, not panicking. Protection should be gaining value. See Step 3 below for Weekly Income-specific protocol.
Iron Condor — one side breached
Either the call side or put side of the IC has been threatened.
→ Cancel the existing GTC close order on that side. Wait for specific roll instructions. Do not close the unthreatened side.
Step 2 — Short Call Spread Breach Protocol
1
Cancel the existing GTC close order
The GTC close was set to trigger at profit. That is no longer relevant. Cancel it now before it creates confusion.
2
Do NOT close the position at a loss immediately
This is the most important step. Closing at a loss locks in the loss permanently. The position still has time and can be managed. Follow your written plan — and if you do not have a rule for this case, follow step 3.
3
Roll further out in time AND up in strike for net credit
Buy back the breached call spread. Sell a new call spread at a higher strike and/or later expiration for a net credit. The goal is to collect enough credit on the new position to offset the debit on closing the old one.
The rolled position is now a HEDGE — no GTC close on the new position
4
Recognize what just happened
You paid to enter the original position (received credit), you collected credit again on the roll, and now you have a short call hedge sitting out in time providing ongoing short delta protection. You got paid twice. The breach did not cost you anything out of pocket.
Step 3 — Weekly Income Short Put Breach Protocol (Market Dropped Hard)
1
Check Protection and short call positions immediately
A large market drop means your Portfolio Protection has gained significant value and your short calls are gaining value from delta. What looks like a loss on the Weekly Income set is likely being offset elsewhere in the portfolio right now.
2
Wait for specific roll instructions
Pick the strike and expiration by your written rules. Do not freelance a roll on the Weekly Income set — the strike choice matters for the overall portfolio delta picture.
3
Roll the short put further out in time for credit
The system will typically roll down slightly in strike on a big down day — more premium available and more safety cushion. The key is collecting credit on the roll, not taking a cash loss.
In a true emergency drop: Protection can be brought from far expiration to near expiration to maximize its value and offset Weekly Income losses
What NOT to Do When Something Is Breached
Do not panic close. Do not add new trades without understanding the portfolio delta impact. Do not watch the screen obsessively. Do not check P&L every five minutes. The system is designed for exactly this moment. Trust the structure, follow the protocol, and wait a day if you are unsure.
TREE 5
Portfolio Protection — When, How Much, and What Kind
The three rules are non-negotiable — this tree tells you exactly what to do when they fire
The Three Protection Trigger Rules — Check Daily
Rule 1
Market hits an ALL-TIME HIGH today
→
Action
Add ONE Protection contract today. This is non-negotiable. The exact structure follows below.
TRIGGERED
Rule 2
Market hits 3 ATR on the HOURLY or DAILY chart
→
Action
Add ONE Protection contract today. Market is extended — buying insurance at the right moment.
TRIGGERED
Rule 3
Market is more than 4.5% ABOVE the 50-day moving average
→
Action
Add ONE Protection contract today. Historically elevated — insurance is warranted.
TRIGGERED
Rule 4
Market rides the 2 ATR band for 4–5 consecutive days
→
Action
Add ONE Protection contract. Even if the ATH, 3-ATR and 4.5% rules haven't technically fired, sustained riding of the 2 ATR for multiple days signals overextension within the spirit of the Protection rules. After the fourth or fifth day, it is reasonable to add another Protection contract.
TRIGGERED
All rules fire
Multiple rules trigger ON THE SAME DAY
→
Action
Still add only ONE Protection contract. Multiple triggers on the same day do not multiply the requirement. Add one and move on.
STILL JUST ONE
Rules fire
On consecutive days (e.g., ATH Monday, 3-ATR Tuesday)
→
Action
Add one Protection on each day a rule fires. Consecutive-day triggers = consecutive-day additions. Build up slowly over time.
ONE PER DAY
No rules
No triggers have fired today
→
Action
✅ No Protection addition needed today. Do not buy insurance unnecessarily — wait for the right moment. Buying at the wrong time is costly.
WAIT
Protection Structure — What to Buy
Source of Funds Protection (Far Out in Time)
When: Market at or near ATH. Low volatility. Insurance is cheapest.
Structure: Bear put spread 4–6 months out. Buy put at current support level, sell put 100 points lower.
Cost: Very low — far OTM, far in time. Delta is tiny.
Purpose: Sit and accumulate. Roll forward later for credit when needed.
→ This is the "plant seeds now, harvest later" Protection
High Gamma Protection (Closer in Time)
When: Market showing weakness. Bearish signals developing. You want more responsive protection.
Structure: Bear put spread 30–60 days out. Higher delta, more responsive.
Cost: Higher than Source of Funds but more powerful near-term.
Purpose: More direct protection against a near-term correction.
→ This is the "active protection mode" Protection
How Much Protection Is Enough? — The Two Phases
1
Phase 1 — Cover the Weekly Income Gap
Calculate your total Weekly Income exposure: (number of contracts) × (width between short and long put strikes in dollars). Example: 40 contracts × $50 wide = $200,000 exposure. Your Protection + short call value should approach this number.
Until Phase 1 is achieved, compensate by running more short calls as supplemental protection
2
Phase 2 — Cover the Entire Portfolio
Advanced stage. Protection notional value exceeds your total Weekly Income exposure. A catastrophic correction would make the portfolio whole and possibly profitable. At 1.5x coverage, a crash is actually a windfall.
Managing Existing Protection
If Protection
Is within 30 DTE
→
Action
Roll forward 3–6 months, same structure. This is routine maintenance — like renewing your homeowner's insurance before it lapses.
ROLL FORWARD
If Protection
Is far out in time and a correction hits now
→
Action
Roll it FORWARD to current month. This activates the protection fully. Far-dated Protection moving close to expiration dramatically increases its delta and value in the correction.
BRING IT FORWARD
If Protection
Has gained significant value on a big down day
→
Action
Consider closing 50% for profit and using those credits to fund new Weekly Income sets at better prices. Take profits, redeploy capital.
TAKE PROFITS
The Mindset About Protection Losses
The right attitude is to be glad to lose the entire cost of Protection. If it expires worthless, the market kept going higher and all the Weekly Income sets paid well. The Protection loss was funded many times over by Weekly Income premium. Losing on Protection is not a failure — it is proof the system worked.
TREE 6
Emergency Protocol — When the Portfolio is Out of Control
For extreme delta, extreme BP usage, or extreme market moves
First Rule of Emergency Protocol
Do NOT make emotional decisions. Do NOT panic close positions. Re-read your written plan first. Then assess the three pillars in order: BP, Delta, then Theta. Fix them in that order.
Emergency 1 — Buying Power Too High (Over 85% Used)
1
Stop adding any new trades immediately
No new Weekly Income sets, no new income trades, no new hedges. Not until BP is restored. Every new trade consumes more BP and makes the situation worse.
2
Identify what is consuming the most BP
Is it the long puts? The Protection positions? Wide spreads? Identifying the largest BP consumers tells you where to focus. Often it is long puts that have drifted far OTM and are consuming BP without providing useful protection.
3
Execute today's rolls — they bring credit in
Rolling short puts brings premium into the account. This increases cash and helps restore BP. This week's scheduled rolls should help. Do not skip them thinking you'll "wait for better conditions."
4
If BP still too high — narrow spreads or close long puts early
One option is to close long puts that are very far OTM to recover BP, accepting reduced protection temporarily. On PM accounts, adding short calls can actually ADD BP rather than consume it — this is the PM superpower.
Wait for specific guidance before making significant BP recovery trades
Emergency 2 — Delta Beyond ±500
1
Determine which direction and how far
Is it heavy SHORT delta (deeply negative — portfolio too bearish)? Or heavy LONG delta (deeply positive — portfolio too bullish)? The fix is different for each direction.
2
Heavy SHORT delta — too bearish
- Roll today's expiring short puts UP in strike aggressively (adds long delta + premium)
- Add short put verticals — these are short puts = long delta (Jan 22 example)
- Close some short call positions if appropriate
- Do NOT add more short calls today
3
Heavy LONG delta — too bullish
- Add short call spreads above the market (adds short delta)
- Roll today's expiring short puts DOWN in strike (less long delta)
- Close some long puts if they are too far ITM
- On PM accounts, short calls can rebalance delta at essentially no BP cost
Emergency 3 — Market Moves 150+ Points in a Day
Market
Down 150+ points (big red day)
→
Response
This is a gift. Protection is gaining value. Short calls are gaining value. Premium on new trades is elevated. Check your Protection value. Roll any expiring puts DOWN for large credit. Opportunistically add new Weekly Income sets at great prices. "Love this drop."
OPPORTUNITY
Market
Up 150+ points (big green day)
→
Response
Weekly Income sets are highly profitable — many short puts near zero. Check if any short calls are threatened. Roll any threatening call positions further up and out. Collect extra premium on rolls. Check if an ATH was hit — if so, add Protection.
MANAGE CALLS
Market
Down 300+ points (black swan territory)
→
Response
Re-read your written plan immediately. Protection should be providing major protection. Short calls near max profit. Consider bringing far-dated Protection forward to current month for maximum delta exposure. The system was designed specifically for this day.
FOLLOW YOUR PLAN
Remember the Structure in Any Emergency
A reasonable design target in a 1,000-point crash is a net loss of only a few percent of the account — for example ~$20,000 on a $500k account. That is the entire point of all the layering — Protection, short calls, staggered Weekly Income sets, multiple expirations. In a true emergency the system is not failing. It is working exactly as designed. Trust the structure.
TREE 7
Getting Started — Your First Trades, Step by Step
Start here if you haven't placed your first trade yet, or if you're switching brokers
Before You Place Any Trade
Read the Foundations Guide at least once. Understand the Three-Department Framework and the Three-Legged Stool concept. You don't need to understand everything perfectly — but you need the basic mental model before your first trade.
Step 1 — Get the Right Broker and Account Type
Account
Under $15,000
→
Recommendation
Start with SPY at any broker. Be aware of assignment risk. Work toward XSP as your account grows.
SPY FOR NOW
Account
$15,000+ (including IRA)
→
Recommendation
Open at Tastytrade. Trade XSP. European style — zero assignment risk. Works in IRA. This is the recommended setup for this system.
TASTYTRADE + XSP
Account
Large account, active trader
→
Recommendation
Apply for Portfolio Margin at Tastytrade. This unlocks the BP superpower where short calls can add rather than consume BP. Discuss requirements with Tastytrade directly.
PORTFOLIO MARGIN
Step 2 — Your Very First Weekly Income
1
Start when you are comfortable carrying the exposure
The signal to open your first Weekly Income set is that you are comfortable carrying the long delta exposure. Choose the strike yourself, by your delta and your buying power, and size it per Step 4.
2
Your safe first entry in the current market
The month-end far-out iron condor (wide strikes, ~200-point put cushion, ~70 points premium) is a sensible first trade for a brand-new user. It is safe enough, with enough cushion, that you can start collecting time decay and get comfortable with order entry.
⚠️ Do NOT put on the weekly or 2-day condors yet — those exist to protect and hedge Weekly Income sets. Without Weekly Income sets they have no anchor.
3
Long put starting leg
Use a far-dated, high-strike long as your first long leg (for example, a long put about six months out near the top of your range). This is your protective inventory.
4
Starting without Portfolio Protection? Use a flat Weekly Income set
Sell the short put and buy the long put at the same strike, different dates. This eliminates the gap that Protection normally covers and removes most downside exposure while you build the foundation.
Example: Sell 6850 short (near-dated) / Buy 6850 long (May). Same strike = no gap = no Protection needed yet. You give up some premium but dramatically reduce risk.
5
Size by instrument and account
SPX ($200k+ AND Portfolio Margin required): Maximum 5 contracts to start.
XSP (under $200k): Maximum 5 contracts to start.
Always keep 30% BP in reserve. Scale every size to your own account.
XSP (under $200k): Maximum 5 contracts to start.
Always keep 30% BP in reserve. Scale every size to your own account.
6
Do NOT add Protection, short calls, or daily spreads yet
Protection has its own trigger rules — never buy it in a choppy or declining market. Daily income credit spreads only make sense once Weekly Income sets are running. The only exception is the month-end far-out IC in Step 2.
Step 3 — Building Over Time
After
First Weekly Income set is running and you understand the roll process
→
Next Step
Add a second Weekly Income set at a different expiration date. Build toward one per weekday (Mon–Fri). Add one at a time — never rush.
ADD Weekly Income set #2
After
3+ Weekly Income sets running, comfortable with rolling, BP managed well
→
Next Step
Begin adding Daily Income trades (CCS and PCS). Every fill gets a GTC close at .65 db immediately — no additional instruction needed. Get comfortable with the income trade process.
ADD INCOME TRADES
After
5 Weekly Income sets running, income trades familiar, Protection rules understood
→
Next Step
Begin adding Portfolio Protection when the three rules fire. This is Phase 1 completion — building toward coverage of your total Weekly Income gap exposure.
ADD PROTECTION
After
System fully running, Protection in place, BP well managed
→
Next Step
Add short calls for delta management. Consider the LEAP strategy when appropriate. You are now running the full three-department system.
FULL SYSTEM
When Your Strikes Differ From Your Plan's Reference Levels
1
Track by expiration date, not by strike
Always anchor a roll to the expiration date. Find the position that expires today and roll that one. The strike may differ from another trader's — that is fine.
2
Record SPX level at your entry for each trade
If one trader entered at 6950 when SPX was at 6960, and you entered at 6880 when SPX was at 6890, you both entered 10 points OTM. Knowing the SPX level at your entry tells you whether you entered in-the-money, at-the-money, or out-of-the-money, whatever the strike.
3
When in doubt about a specific trade — understand the spirit first
Ask: Is this an income trade (GTC close needed)? Or a protective trade (no GTC close)? Is it there because of a delta problem specific to your account? Understanding the purpose tells you whether it applies to your situation.
The Foundations Guide has all the context needed to understand the "why" behind every trade type
Final Reminder for New Users
There is no deadline. It is not everything or nothing. You can run fewer Weekly Income sets. You can skip an income trade when you are busy. You can ease into it. What matters is that you understand the concepts deeply — the trades will follow naturally. Think of the first three months as your educational period. Your results will compound as your understanding compounds.
TREE 8
Position Sizing — Every Credit Spread and IC
Run this before placing any daily income trade. Size correctly or don't place it.
The Most Common Expensive Mistake in ThetaTracker Pro
Taking on too much size on daily income credit spreads and iron condors. These trades have a ~6:1 risk/reward ratio as standalones. Without the Weekly Income premium to offset them, a max loss is devastating. Calculate your risk BEFORE every entry — not after.
Step 1 — Calculate Your Risk Per Contract
1
Find the spread width
Subtract the bought strike from the sold strike. A 6800/6785 put spread = 15-point spread = $1,500 gross risk per contract.
2
Subtract your credit received
$1,500 spread − $225 credit = $1,275 net risk per contract. This is the number that matters. Multiply by your contract count to get total risk exposure.
3
Compare risk to your accumulated Weekly Income premium
Your daily income risk should not exceed your accumulated Weekly Income premium. If you have $60,000 sitting in Weekly Income premium, a $10,000 IC loss still leaves you net +$50,000 for the week. If you have $60,000 in Weekly Income premium and take on $80,000 in daily income risk — the math no longer works.
Rule: Total daily income risk ≤ accumulated Weekly Income premium. Never the reverse.
Step 2 — Determine Your Lot Size
A full-size trade for you is
5 contracts
→
Quarter Lot
Testing the waters. New idea, uncertain direction. Minimum footprint. Scale your equivalent to 25% of your normal size.
QUARTER SIZE
A full-size trade for you is
10 contracts
→
Half Lot — Default Entry
The standard entry size. Go in at a half lot to start most of the time. This is NOT a small position — it is the default. Scale your entry to 50% of your normal size.
HALF SIZE
A full-size trade for you is
20 contracts
→
Full Lot — 100% Committed
High conviction. Often built by adding to a half lot after price confirms. Scale your equivalent to 100% of your normal size.
FULL SIZE
Scale to YOUR Account
Position sizes in examples may come from a much larger account than yours. If you have $200,000 and an example shows 10 contracts, your equivalent might be 2 contracts. There is no shame in 1 or 2 contracts. When one of these goes to max loss, you will be deeply grateful you sized correctly.
Step 3 — Iron Condor Risk Math
IC vs Single Side
Same margin requirement either way
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Double Credit Advantage
An IC has the same $1,275 margin requirement as a single put spread (because both sides can never simultaneously lose). But you collect TWO credits. Net risk = spread width − TOTAL credits from both sides. A 15-pt IC with $4.50 total credit = $1,050 net risk per contract vs. $1,275 for a single side.
One side breached
Market blows through one spread
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True Max Loss
Lose ~$1,275 on the breached side. Keep the credit from the other side (~$225). Net loss: ~$1,050. Still a loss — but Weekly Income sets profiting from the same move offset it within the portfolio.
MANAGE — SEE TREE 4
Step 4 — The Risk/Reward Reality Check
Why These Trades Have a Bad Standalone Risk/Reward — And Why That's Fine
A single put credit spread risking $1,275 to make $225 is a 6:1 risk/reward. That means six consecutive wins are needed to recover one max loss — as a standalone trade.
But within the ThetaTracker Pro system, these are never standalone. They exist to generate theta, manage delta, and complement the Weekly Income sets. When the trade loses, the Weekly Income sets win. When the Weekly Income sets are under pressure, the daily incomes may be at max profit. The portfolio sees a completely different risk profile than any individual trade.
Be willing to put on trades you purposely expect might lose 100% of the credit — because if they do, you are winning a lot on the other side. That is the whole reason the trade was put on.
But within the ThetaTracker Pro system, these are never standalone. They exist to generate theta, manage delta, and complement the Weekly Income sets. When the trade loses, the Weekly Income sets win. When the Weekly Income sets are under pressure, the daily incomes may be at max profit. The portfolio sees a completely different risk profile than any individual trade.
Be willing to put on trades you purposely expect might lose 100% of the credit — because if they do, you are winning a lot on the other side. That is the whole reason the trade was put on.
TREE 9
Weekly Income Entry — When, How, and What Size
The core revenue engine of the entire system — use this tree every time you consider starting a new Weekly Income set
What the Weekly Income Is
The Weekly Income is the heart of the ThetaTracker Pro system — a bullish-to-neutral income engine built from short puts (weekly income) and long puts (rolling protection). Every other component — daily incomes, Protection, short calls, LEAPs — exists to support, protect, or enhance the Weekly Income set. It generates theta income 24/7 and is the primary reason the system works.
Step 1 — Is Now the Right Time to Add a New Weekly Income set?
Signal
You are comfortable adding a new Weekly Income set
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✅ Your Signal to Enter
Start one when you are comfortable carrying that long delta exposure. Choose the strike yourself. Scale your size to your account.
ENTER NOW
Signal
You are rolling existing Weekly Income sets but not adding new ones
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Roll Only — Do Not Add
You are in maintenance mode on Weekly Income sets. Roll your expiring short puts by your roll rules. Do not open new Weekly Income sets until you decide to add one.
ROLL ONLY
Signal
You have reduced Weekly Income exposure significantly (defensive mode)
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Do Not Add — Follow His Lead
Reduce Weekly Income sets when market conditions are choppy or downtrending. The Weekly Income set is bullish-to-neutral — it underperforms in a sustained downtrend. Stay in a defensive posture. Daily income trades fill the income gap in the interim.
WAIT
BP Check
Below 25% buying power available
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🚨 Stop — Restore BP First
No new Weekly Income sets if BP is critically low. Adding a new Weekly Income set consumes significant BP. Bring BP back above 30% through roll credits before adding any new position.
FIX BP FIRST
Step 2 — Choose Your Weekly Income Structure
Situation
Protection already in place, market conditions normal
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Normal Structure
Short put and long put at different strikes (e.g. short 5700 / long 5650). The gap between strikes is covered by your existing Protection. This is the standard Weekly Income set that generates the most premium.
NORMAL Weekly Income set
Situation
No Protection yet — new to the system or in a defensive period
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Flat Structure — Same Strike, Different Dates
Sell the short put and buy the long put at the SAME strike, different expirations. Example: Sell 5700 near-dated / Buy 5700 May. Eliminates the gap exposure that Protection would cover. You accept less premium in exchange for built-in protection. When you are brand new, use the same strike on the long.
flat Weekly Income set
Situation
Defensive mode — inverted Weekly Income sets
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Inverted Structure — Long Above Short
Long put strike is ABOVE the short put strike. Maximum downside protection built directly into the structure. Accepts significantly less net credit in exchange for reduced risk. Use it when the market environment warrants extra caution.
INVERTED Weekly Income set
Step 3 — Set Up the Two Legs as Independent Inventory
1
Short Put — the weekly income leg
Choose a strike and expiration by your delta target. This is your rolling income engine — collect credit every week. Size per Step 4 below.
⚠️ No GTC close on the short put. It is NEVER closed for profit — always rolled to the next week for fresh credit.
2
Long Put — the protective inventory leg
Use a far-dated, high-strike long. This is your protection — rolled independently when within 30 DTE.
The long put does NOT belong to the short put. They are independent inventory items. Roll either one at any time without touching the other.
3
Long put within 30 DTE? Plan the roll now
When any long put approaches 30 days to expiration, start planning the roll. This is a net debit — it will consume BP. Arrange BP now so the roll doesn't catch you short of capital at a critical moment.
4
Fan your Weekly Income sets across Monday–Friday expirations
The goal over time is one Weekly Income set expiring each weekday (Mon/Tue/Wed/Thu/Fri). This fans out gamma risk — no single expiration dominates. Build toward this gradually, one new Weekly Income set per week.
Step 4 — Size Your Weekly Income set Correctly
Instrument
SPX — requires $200k AND Portfolio Margin
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Maximum 5 Contracts to Start
SPX is 10× the size of XSP. Five SPX contracts represent significant exposure. Do not exceed this at launch regardless of account size. Build gradually from there as BP allows.
MAX 5 TO START
Instrument
XSP — accounts under $200k or without PM
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Maximum 5 Contracts to Start
More manageable exposure per contract. Build from 5 as your account and confidence grow. XSP is European style — no assignment risk, IRA eligible.
MAX 5 TO START
BP Rule
After adding new Weekly Income set
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Minimum 25–30% BP Must Remain
Never exceed 70–75% BP usage. The 25–30% reserve is not optional — it is the capital that allows you to manage rolls, fund long put renewals, and absorb unexpected volatility without being forced to close positions at bad prices.
CHECK BP
Step 5 — Ongoing Weekly Income Management Rules
Every Week
Short put expiring today or tomorrow
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Roll at 3:30pm
Wait until 3:30pm to see where the market closes. Then roll to next week's expiration. UP in strike when market strong and short delta heavy. FLAT when cautious. DOWN when defensive.
ROLL AT 3:30PM
Short put
Significantly in the money
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Roll Immediately — Don't Wait
Deep ITM short puts have little or no extrinsic value left. Roll now to capture any remaining credit and reset the position. Anything you can get is a bonus — you are in management mode.
ROLL NOW
Market
Drops 200+ points in a day
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Protection and Short Calls Are Working
This is the system functioning as designed. Your Protection spread is gaining value. Your short calls are gaining value. Weekly Income sets are under pressure — but the other departments are offsetting it. Do not panic-close Weekly Income sets. Follow your roll rules.
TRUST THE SYSTEM
The Weekly Income Inventory Mindset — Always
No long put belongs to any short put. They are all inventory. You may have a 5700 short expiring Friday, a 5650 short expiring next Monday, and long puts out in June at 5600. None are paired. Roll the shorts weekly. Manage the longs when they approach 30 DTE. At full deployment, a large account may run dozens of Weekly Income sets — several expiring on each weekday — fanning gamma risk across the entire week.
TREE 10
LEAP Entry & Covered Call Campaign
The opportunistic fourth component — deployed during corrections, harvested through the recovery
What the LEAP Strategy Is
A LEAP (Long-term Equity Anticipation Position) is a long call option 6–12+ months out in time. Buy LEAPs during significant market corrections to capture the eventual recovery — then sell short-dated calls against them weekly to generate income that pays off the LEAP cost over time. Over time the weekly income can pay off most or all of the LEAP cost. This is not a permanent position — it is opportunistic, deployed when specific conditions are met and managed through the recovery.
Step 1 — Are All Five Entry Conditions Met?
Condition 1
Market has pulled back 5–10%+ from ATH
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Required — Not Optional
LEAPs at ATH are expensive. The entire strategy depends on buying long calls when they are meaningfully cheaper than at highs. A 5–10%+ correction brings both the underlying price AND implied volatility to levels that make the math work. Do not enter at or near ATH.
CORRECTION REQUIRED
Condition 2
Market has confirmed a bounce — NOT a falling knife
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Confirmation Required Before Entry
Do not try to time the bottom. Wait for confirmation once you see the movement. Confirmation = market stopped going down AND closed above the 50 SMA with follow-through the next day. Both required. One day is not enough.
WAIT FOR CONFIRMATION
Condition 3
Moving averages beginning to stabilize
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Chart Must Confirm
Spaghetti MAs beginning to resolve. 9 EMA turning up. Stochastics turning from extreme oversold. The squeeze may be forming. Multiple timeframe confirmation that the downtrend is exhausting — not just a dead-cat bounce.
CHECK TA
Condition 4
Short delta protection already in place
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Never Enter a LEAP Naked Long
Have enough short calls on top to sustain a potential downfall if you are wrong. Short calls and/or Protection must already be in place as downside protection before adding the long LEAP. A LEAP without protection is a directional bet — not the ThetaTracker Pro system.
PROTECTION FIRST
Condition 5
Your plan's entry level has been reached
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Use GTC at His Price — Never Chase
Do not chase it — let it come to you. Place a GTC buy order at your planned price. If the market doesn't reach that level, no fill — and that is perfectly fine. The discipline of not chasing is as important as the entry itself.
GTC AT HIS PRICE
Step 2 — The Staircase Approach (Scale In, Don't Go All-In)
1
First entry — initial position
One contract at the first key support level you identify. This is the seed — not the full position. If the market reverses from here, you have one contract at a good price and the strategy is already working.
2
Add at each subsequent support level
If the market continues lower, add one more contract at each key level you identify. Example: first at 6600, add at 6500 + start Weekly Income sets, add at 6400 only, add at 6300 + Weekly Income sets aggressively. Each level = one additional contract, never more.
If the market never reaches the lower levels, you still have a profitable position from the higher entry. Patience is the strategy.
3
Sell short calls against the LEAP immediately on fill
The moment each LEAP fills, sell a short-dated call against it. This begins the income harvest immediately and starts reducing your cost basis from day one. The first covered call credit comes off the LEAP cost.
⚠️ No GTC close on the LEAP itself — it is a long-term position managed manually. GTC closes apply only to the short calls sold against it.
Step 3 — The Covered Call Campaign (Weekly Income Harvest)
Each week
Short call expires or is closed
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Sell the Next Short Call Immediately
Keep the covered call campaign running continuously. Every week without a short call is a week of income left on the table. Sell OTM calls — typically 50–100 points above current market level depending on VIX.
SELL NEXT CALL
Math check
After 8 weeks of short call income collected
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LEAP is Effectively Free
At ~50 pts/week × $100 = $500/week. Each week of short-call income pays down the LEAP cost, and all income after the cost is recovered, plus any LEAP appreciation, is profit. Work out your own payback period from your LEAP cost and your weekly credit.
COST RECOVERED
Market scenario
Market never recovers — LEAP expires worthless
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Short Call Income Covers the Loss
If 8+ weeks of covered call income was collected before expiration, the strategy is still profitable even with a worthless LEAP. The math builds in this scenario as the base case — recovery is the upside, not the assumption.
INCOME PROTECTED
Market scenario
Market recovers strongly
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Double Win — Income + Appreciation
LEAP gains intrinsic value as market rallies. Roll short calls progressively higher as market rises. Eventually close LEAP for significant profit. Short call income PLUS LEAP appreciation — the ideal outcome.
DOUBLE WIN
Step 4 — Managing the Short Call When Breached
Short call breached
Market rallies above your short call strike
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Roll Up and Out for Credit — This Is the Ideal Scenario
The market rallying through your short call means your LEAP is gaining value faster than the short call is losing. Roll the short call further up in strike and further out in time for additional credit. The breach signals the recovery the LEAP was bought for is underway.
ROLL UP AND OUT
Market continues lower
After LEAP entry, market keeps dropping
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Continue Selling Lower Short Calls
Rising VIX means more premium per short call. Accept the LEAP mark-to-market loss — it is offset by short call income and will recover with the market. Add the next staircase contract if your plan's next level is reached. This is the plan working, not failing.
STAY THE COURSE
Step 5 — The Hard Exit Rule
200 SMA Hard Exit — Non-Negotiable
If the market closes more than 2.5% below the 200-day SMA on a Friday close — close the LEAP. This signals something has fundamentally changed in market structure beyond a normal correction. The environment that justified buying the LEAP no longer exists. Take the loss. Exit cleanly. This is not a suggestion — it is a hard rule.
Friday close
Market closes 2.5%+ below 200 SMA
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🚨 Close All LEAPs
Close every LEAP position. Take the loss. Do not hold through a potential structural bear market with long calls. The covered call income collected to date offsets some of the loss — but exit is mandatory under the rule.
EXIT IMMEDIATELY
Friday close
Market closes within 2.5% of 200 SMA or above it
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Hold — Continue Campaign
No exit signal. Continue selling short calls weekly. The 200 SMA is holding as support. The recovery thesis remains intact.
HOLD AND HARVEST
Why Use LEAPs
If you are long the market long-term, you want to capture sustained up moves. Weekly income works well within a range, but a LEAP captures the upper extreme that the Weekly Income sets cannot fully participate in. The LEAP captures the recovery that the Weekly Income sets structurally cannot fully benefit from — making it a natural complement to the core income engine.