Maximum Reward : Limited to the Net Premium Collected from the At The Money puts and calls options sold.
Net Position: This is a net credit trade as you are selling the puts and calls options of the same strike price and expiration date.
Collect premium from puts and calls options and benefit from double time decay and a contraction in volatility.
Let the options expire worthless and earn the full sum of premium collected Simply offset the spread by buying back the puts and calls options that you sold in the first place. This is a net credit trade as you are receiving the premium for both the puts and calls options sold.
Remembering that the last month of an option’s life has the greatest amount of time value erosion occurring.
The use of stock in configuring these positions does not add material merit in controlling risk and there is no added monetary benefit in tying up available trading capital in a stock-dependent synthetic position that could otherwise be achieved without the use of stock.
As an options trader in the first place, you want as little to do with the stock itself as possible, other than to configure the required option position around the underlying product, which can be substituted with a cash-settled Index instead of a stock-settled Index.
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