Buy long stock add a long put deep ITM with furthest LEAP series available. LP to have less than 30% extrinsic (time) premium. Then add a short strangle front month to pay down the LP. To establish the risk of long stock with long put you must take the time premium minus the total credit from the short strangle. You will incur risk with the short strangle but only on the down side with the naked short put, the short call can be covered by the stock. Look to place shorts at key support & resistance levels.
Adjusting: roll the entire strangle (envelope) when adjusting to lock in profits and minimize losses.
In case of a gap up or down will need to work at mitigating the losses over time, should still be able to come out ahead by the end of the LEAP LP.
Can also add verticles to the trade to maximize current trend, or replace the short strangle with a iron condor etc.
Doing this trade with an ETF makes sense, since the risk to zero is irrelavent. Also as a diversified product, gaps up/down are less common and not so severe when they happen. You may also short strangles/verticles against underlying each and every month, not worrying about earnings or announcements with an individual stock.
The picture above is a snapshot of the analyzer for a QQQQ envelope trade with additional bear call at the 52 strike.
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