Criteria for placing a trade.

Nat,
the lesson i learned from the crazy move up and selling call spreads into it is to dislike call credit spreads. Serioulsy, the volatility was too low and that's my core edge. Now if a stock is in a range, i would look at call credit spreads, but more importantly it is to diversify my strategy allocation. and to lower the number of call credit spreads I have on. Volatility drives all. I rather buy debit put spreads with some positive theta when vol is low. but hopefully we won't see that kindof cray cray move for a long time. maybe never.

Hey everyone, my bread and butter are selling put verticals and buying put calendars and here is how I do it.

For both trades my parameters are:
A - Liquid product - 800k plus Volume in stock
B - Liquid Options - More than 1k in Open interest in the strikes I want to trade and more than 1k in option volume
C - Small bid and ask differential

Sell of put verticals:
1 - An underlying has to look ridiculously oversold (in my view).
2 - Current IV percentile above 45%
3 - I look at the expected move in the cycle I want to sell to decide and to compare with what's available in my strike selection.
4 - I go out between 55 and 30 days till expiration (DTEXP) --I try my best not to open verticals with less than 35 DTEXP, but if opportunity looks good I push to 30, under 30 I go next cycle)
5 - I start by selecting my short strike at the 68% or 65% Prob OTM strike and compare to the expected move for that cycle. Most of the time the expected move is greater than the short strike I want to sell, but I'm not expecting to be in this trade for more than 1 to 2 weeks (some times less, some times more.)
6 - I go over my expectations : If the expected move is 8 points but my short strike at 68% has 6.5 points away from being ITM then I'm ok with that (remember - higher IV will help your short strike be farther away from ITM and also possibly outside expected move)

Some notes before moving on:
--- When IV is high in oversold conditions your pot odds get better, any move in your favor and IV will collapse, plus theta decay and decay curve will pay out almost immediately. Most of the time I'm expecting the move to be within the first 7 to 10 days from the opening day, so I'm also expecting to close my position within that period of time.
--- I try not to go to the 25 DTEXP because if I'm wrong, I'll need more time and 5 days within the inflection points in the decay curve can make a big difference. --- If one third the with of the strikes is too close to the ITM and the current IV percentile is lower than 45%, I Immediately jump to the call spread at 50/50 (1 ITM - 1 OTM) again, as long as the current IV percentile is lower the 45% - the lower the better.

If my assumption is correct - I manage the winner. (Easy, more than 35% profit and I start looking for the exit.)

If I'm incorrect:
A) Usually If I'm wrong it will be within the 7 to 10 day period, then I will move to manage the trade based in the mechanics, the probabilities, duration over direction and cyclicality. At any point that this trade becomes a scratch, I will close.
B) As I have this open losing position, I will start to look for a second opportunity in the same oversold trade (If I thought it was great before, its probably amazing now!) I follow the same mechanics but I will open the position in whichever month goes after the one I have the losing position. I take it as an independent and separate trade, I do not mix them or look at them as one trade and I will manage them separately, I look at it as if this is a second opportunity to enter the same trade at a better price.

My personal Don'ts:
I never sell call credit spreads in up markets and low IV --- Unless IV is higher than 60% (current IV percentile) and not much move to the downside has happen.
I never sell the put spreads or even consider to do so in any other market condition.
I never sell the put spread into an up move, always sell into the down move (IV will be higher in down moves)
I never buy back in a down day against my position - NEVER!
I never expect to keep the full value of the spread, +35% return on risk. (If things keep on going my way I expect to buy to close when I see theta decay slows down theta daily profits.) 
I never roll a trade until the week before expiration (10% of the time I already have a position for the next cycle so 90% of the time I have nothing to roll, a better position is already in place, -- it also cuts my commission costs


---If the trade was a call debit spread that went against me, the Friday before expiration I close the short strike and leave the long call for a "Hail Mary" In expiration week. If nothing happens I let it expire but at least I don't pay for the commission in that long leg.

I will take some time in the next few days to write the mechanics I use for the calendar spread. I hope this helps

BTW - If you have some extra or better parameters, questions or comments, please feel free to let me know!

Peace!

First, is it 1 year, 3 month, 1 month IV or IV percentile? You wrote IV, but the attached screenshot has IV percentile (which makes more sense).

I never thought of making 3 different IV percentile columns for searching/sorting - that's a really good idea.