Zebra (Zero Extrinsic Back Ratio)
Description
Buying two deep ITM options and selling one ATM option to zero out extrinsic value.
Trading Logic
Mimics stock movement without the drag of time decay.
Practical Example
Stock at $100. Buy 2 $90C, sell 1 $100C.
P/L Curve
Chart Description
- X-Axis: Stock price at expiration
- Y-Axis: Expected P/L ($)
- Green area: Profit; Red area: Loss