Unbalanced IC

Use unbalanced when you have a slight directional bias (think stock more likely to go one way). If you're truly neutral with no lean, use a balanced IC. The imbalance should match your confidence level.

It has more directional risk on the aggressive side, but the same defined-risk structure. You're trading symmetric risk for directional exposure. If your bias is correct, you profit more; if wrong, you lose more on that side.

Start with slight imbalance (delta ±5 to ±10). Only increase if you have higher conviction. A rough guide: low confidence = slight imbalance; moderate confidence = moderate imbalance; high confidence = consider credit spread instead.

The aggressive side will be tested. You have three choices: close the entire position (take loss), roll the aggressive side away (defensive adjustment), or close just the aggressive side (leaves you with single credit spread).

Yes. You can use wider wings on one side (more max loss but more credit) and narrower on the other. This creates different risk/reward profiles for each direction without changing strike distances.

Put skew means puts have higher IV than calls at same delta. This makes put credit spreads more lucrative. By making the put side more aggressive, you capture more of this skew premium.

Contract imbalance creates stronger directional exposure quickly. Strike imbalance is more subtle. Use contracts when you want significant bias; use strike distance for nuanced positions.

Options: (1) Close entire position if bias is wrong, (2) Roll aggressive side further away while keeping conservative side, (3) Close just the aggressive side and keep the other as a credit spread. Choose based on whether you still believe in original thesis.

Not necessarily. You can combine strike imbalance with width imbalance. Wider wings on the aggressive side collects more credit but has higher max loss. Match the structure to your risk tolerance for each direction.

Sum the deltas of all four legs. Put credit spreads have positive delta; call credit spreads have negative delta. Example: Put spread delta +15, Call spread delta -8 → Position delta = +7 (bullish).

Calculate expected value at multiple imbalance levels using probability-weighted outcomes. Test delta configurations from +5 to +20 (or negative). Find the level that maximizes expected return per unit of risk. Backtest across historical data.

Consider adjusting when: (1) Stock moves significantly toward aggressive side (reduce imbalance), (2) Your outlook changes (increase or decrease), (3) Greeks have drifted significantly from entry. Weigh adjustment costs vs benefits.

Track 25-delta skew vs historical range. When skew is at high percentile (puts expensive), favor put-heavy unbalanced ICs to capture rich premium. When skew is flat, the advantage is reduced.

Sum position deltas across all holdings. If net delta becomes too large (e.g., >50), you have significant directional exposure. Balance by adding opposite-biased positions, hedging with stock, or reducing positions.

There's typically an optimal imbalance level that maximizes expected return. Too little imbalance doesn't capture directional view; too much adds excessive risk. The optimal point depends on your probability estimates and risk tolerance.