options_trading_playbook v1.0.0

name: "options_trading_playbook" description: "Pick, size, and manage defined-risk options spreads (bull call, bear put, bull put, bear call, iron condor): a selection framework driven by market outlook and volatility, payoff math for every structure, position sizing from the 1-2% rule, and management rules for exits and rolls. Triggers when a user asks how to choose, structure, size, or manage an options trade or spread, or wants a full trade plan built." metadata: { "includeInPrompt": false }

Options Trading Playbook

Purpose

Turn "I think the market will do X" into a concrete, sized, managed spread trade. The workflow runs select, structure, size, manage, and it refuses to produce a plan when the numbers don't justify one. Everything here is defined risk only: vertical spreads and the iron condor. No naked legs, ever. This is education, not financial advice, and the output says so plainly.

Workflow

1. Assess

Ask for, or read from context, five inputs before picking anything:

• Outlook: bullish, bearish, or neutral on the underlying, and over what timeframe.
• Volatility: IV Rank and IV Percentile for the underlying. If the user can't supply them, ask for the IV figure on their chain plus a sense of its normal range, or note the assumption openly.
• Timeframe: days to the target move, which sets the expiration to shop.
• Liquidity: the underlying must have tight options markets. Skip anything with wide bid/ask spreads or dead open interest; spreads bleed out on bad fills.
• Account size: needed for sizing. Never skip this.

2. Select

Map outlook and IV environment to a structure using references/selection-matrix.md. The short version:

• Outlook is directional and IV is low: debit spreads (bull call for up, bear put for down). Cheap premium, time decay working against you.
• Outlook is neutral and IV is high: credit spreads (bull put, bear call) or an iron condor. Rich premium, decay working for you.
• Neutral outlook and cheap IV: prefer buying the debit spread only if the move is likely, otherwise sit out. Cheap IV favors buyers, not sellers.
• If outlook and IV disagree (bearish but IV rock bottom): state the conflict and let the user pick which side of the argument they're trading.

3. Structure

Pick strikes and expiration, then compute the full risk picture with bin/payoff.py or the formulas in references/strategy-formulas.md. Every trade plan must carry, per spread: net debit or credit, max profit, max loss, breakeven price(s), and probability notes (e.g. where short strikes sit relative to the expected move, expected move = price x IV x sqrt(days/365)).

Strike guidance: for credit spreads, place short strikes outside the market's expected move; for debit spreads, place the long strike near the money and the short strike where the target lands. Same expiration on all legs.

4. Size

From references/risk-discipline.md, non-negotiable:

• Risk budget per trade = 1% to 2% of account equity, measured on the structure's max loss, not the premium on the ticket.
• Contracts = floor(budget / max loss per spread). If the answer is zero, the trade doesn't fit the account: say so and stop. Never round up.
• One idea, one risk budget. Two spreads on the same directional bet is one trade.

5. Manage

Set the management plan before entry, then follow it mechanically:

• Debit spreads: target taking profit around 50% of max profit; cut or reassess around 50% of max loss. Time decay accelerates late, so debit spreads have a "decay deadline" a few weeks out from expiry.
• Credit spreads / iron condors: target taking profit around 50% of the credit; reassess or roll when the underlying threatens a short strike.
• Rolling: debit spreads get rolled out (later expiry) to buy time; credit spreads get rolled out-and-away (later expiry, further OTM) when the move goes wrong. If IV is rising, roll credit-spread short strikes further OTM; if falling, roll them closer.
• Never hold into expiration hoping for a miracle. Close, roll, or accept assignment deliberately, never accidentally.

Output Contract

A finished trade plan contains all of these, in plain language:

1. The thesis (outlook + IV environment, one or two sentences).
2. The chosen structure and why the alternatives lost.
3. Legs: each strike, call/put, buy/sell, expiration.
4. Numbers: net debit/credit, max profit, max loss, breakeven(s), max loss as a percentage of account equity, contract count and how it was derived.
5. Management: profit target, stop trigger, roll plan, expiry handling.
6. A skip call when applicable: "this trade doesn't fit" beats a bad trade, every time.
7. The disclaimer: educational content, not financial advice; options can lose the full amount risked.

Operating Rules

1. Accuracy rule: every factual claim is verified via web search or a primary source. No invented numbers, dates, quotes, or events. Unverifiable gets cut or framed as opinion.
2. Defined risk only. If a requested structure has an unbounded leg, say no and offer the spread version.
3. State assumptions explicitly: if IV figures or greeks are guessed, label them as such.
4. Worked examples in this skill use hypothetical prices labeled as such; never present them as market history.
5. Keep every deliverable plain and direct: no em dashes, no formulaic AI phrasing, varied sentence rhythm. If a sentence sounds like a press release, rewrite it.