Maintains an OTM Long Put (~3-5% OTM, delta ~ -0.35) with 90 days to expiration. Rolled forward automatically when DTE ≤ 30 to eliminate tail risk and provide a margin-efficient floor.
Sells short put options (~1-2% OTM, delta ~ -0.25) expiring in 5-7 trading days. Harvests high theta decay rate (Θfront >> Θback) while covered by Leg 1.
"The short put is nearing expiration with a negative delta, which could lead to significant losses if the underlying price falls below the strike price. Rolling down and out to a higher strike with more time to expiration will reduce the risk of assignment while maintaining a protective floor. The long 90-DTE put provides a strong insurance floor, so rolling the short put is a prudent risk management strategy."