February 18, 2025 | Read Online

Don Kaufman here.

Let's talk about in-out spreads—my bread and butter, my go-to strategy, my faithful companion in a market that has frankly lost its mind.

If you've been watching the markets lately, you know they're stuck in a tight range, skew is off the charts, and volatility is about as predictable as my 10-year-old on a sugar high.

So why do I lean on in-out spreads right now?

The answer is simple: they fit this market like a glove. Tight range? Check. Massive skew? Check. Defined risk? Double check. Let's break it down.

What the Heck is an In-Out Spread?

First, let's make sure we're all on the same page. An in-out spread is a type of options trade where you buy one option (in the money) and sell another option (out of the money) within the same expiration cycle. It's a defined-risk, defined-reward strategy that keeps you in control while still giving you room to profit.

For example:

Bullish? You buy a $100 call and sell a $105 call.
Bearish? You buy a $100 put and sell a $95 put.

This strategy isn't about swinging for the fences. It's about quick, manageable gains. My goal? 30% profit in three days. That's it. No hero trades, no doubling down, no losing sleep over a random Fed comment.

Why In-Out Spreads Work in THIS Market

Here's the thing: this market is weird. It's stuck in a tight range, skew is going haywire, and volatility is giving us just enough movement to trade but not enough to make big directional bets. That makes in-out spreads the perfect tool for the job.

Here's why:

1. Defined Risk in a Volatile World

Markets may look calm on the surface, but under the hood, there's a lot of risk bubbling up. One bad headline, one rogue tweet, and you're staring at a massive move. With in-out spreads, you know your max risk upfront. You're not rolling the dice on an unlimited loss.

This is key in a market like this, where we're seeing sudden, unpredictable pops and drops. In-out spreads let you dip your toe in the water without jumping into the deep end.

2. Skew is Off the Charts

Let's talk about skew, which is the difference in implied volatility (IV) between calls and puts. Right now, skew is the highest it's ever been recorded. That means calls are trading at a massive premium compared to puts.

Translation: bullish trades are expensive, bearish trades are cheap.

In a market like this, where the upside feels capped and the downside is wide open, why would you overpay for calls? Instead, you can use in-out spreads to take advantage of the cheaper puts and position yourself for a quick, defined move lower.

3. Quick Profits in a Range-Bound Market

This market hasn't been moving much. We're stuck in what I like to call the "volatility box"—a tight range where every breakout attempt gets smacked back down.

In-out spreads thrive in this kind of environment. You're not holding these trades for weeks, hoping for a miracle. You're in and out in a few days, targeting 30% gains. It's the perfect strategy for a market that's grinding sideways with occasional bursts of movement.

4. Gamma Risk is Huge

Here's another reason I love in-out spreads right now: gamma risk. When the market stays in a tight range for too long, it's like rolling a snowball—risk builds and builds until it eventually pops.

If we break out of this range, the move could be explosive. But here's the thing: I don't know which way it'll go, and neither do you. That's why I like in-out spreads—they keep my risk defined while letting me profit from the short-term moves that happen before the market picks a direction.

Why Bearish Trades are More Attractive

Let's be honest: I'm bearish in this market, but not because I hate the world (though some days, I do). I'm bearish because the math makes more sense right now.

When skew is this high, calls are overpriced, and puts are a relative bargain. That's like going to a steakhouse and seeing a $50 salad on the menu while the ribeye is only $20. Why would you pay up for the salad?

In-out spreads let me take advantage of this skew.

I can structure trades where the cost of the put spread is much lower than the equivalent call spread, giving me better odds and a better risk/reward ratio.

How I Trade In-Out Spreads

Here's the game plan:

Pick a Stock or Index: I look for something liquid with a clear range. Lately, I've been trading Meta, JP Morgan, and ETFs like XLU or FXI.
Go Bearish (Usually): With skew this high, bearish trades are often the better deal. I'll buy a slightly in-the-money put and sell an out-of-the-money put—simple, effective, and cost-efficient.
Target a 30% Gain: I set my exit order as soon as I enter the trade. No emotions, no second-guessing. If it hits my target, I'm out. If not, I'll manage the trade and look for the next opportunity.
Stay Flexible: While I tend to lean bearish, I'm not married to any bias. If a bullish setup makes sense, I'll take it—but only if the math checks out.

A Real-Life Example: Meta (META)

Let's use Meta as an example. Last week, I opened a bearish in-out spread on Meta because:

The skew was ridiculous—calls were way overpriced compared to puts.
Meta was overbought, and I expected some sell-side action.

I paid $2.38 for the spread and set my exit target at $3.10—a 30% gain. Sure enough, Meta dropped like a rock this morning, putting me in a position to profit in one day.

In-out spreads aren't flashy, but they work—especially in a market like this. With skew at record highs, volatility bubbling under the surface, and markets trading in a tight range, this is the strategy I lean on to stack consistent wins.

It's all about the math. Don't overpay for overpriced calls. Use skew to your advantage, stay disciplined, and set your targets.

If you're looking for a way to grow your account without losing your shirt, in-out spreads are the answer.

Join the In/Out Advantage Today

This is your chance to learn and trade the #1 strategy for growing small accounts, starting with as little as $100.

With In/Out Advantage, you'll get:

Weekly $100 Trades: I'll send you everything—what to buy, what to sell, and the target price.
Video Updates: See exactly what I'm doing in my account every week.
Small Account Growth Masterclass: A complete guide to mastering this strategy.
My Proprietary Indicator: Use the same tool I rely on to find trades.

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To your success,

Don Kaufman

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