Understanding the Strategies Behind Rule of 16 Plus: Credit Spreads, Debit Spreads, and Iron Condors Explained

Every trading day, Rule of 16 Plus posts a 0DTE (zero days to expiration) SPX options trade for each of its strategies, along with the theoretical credit and the actual fillable credit, so you can see what a real trader could have collected. If you've looked at a pick and wondered what "Bull Put Spread 7755/7750" actually means, this post is for you.

We'll start with a quick tour of each strategy on the site, then go through the building blocks those strategies use: put and call credit spreads, put and call debit spreads, and the iron condor. Each section links to a YouTube walkthrough so you can watch a trade being set up step by step.

What Is the "Rule of 16"?

The VIX measures the market's expected annualized volatility for the S&P 500. There are roughly 252 trading days in a year, and the square root of 252 is about 15.87, or roughly 16. Dividing the VIX by 16 therefore gives an estimate of the market's expected move for a single day, as a percentage.

Here's an example. If the VIX is 14.65 and SPX is at 7,775:

• 14.65 ÷ 15.87 ≈ 0.92% expected daily move
• 0.92% × 7,775 ≈ ±72 points

That expected move is the ruler every strategy on the site uses to decide where to place strikes. Price usually stays inside it, and the strategies are built to profit when it does.

The Strategies on Rule of 16 Plus

Rule 16 · At Open

This is the core strategy. At the open, it reads the day's trend using the 3-period EMA compared with the 9-period EMA, calculates the Rule of 16 expected move, and places a defined-risk credit trade based on what it sees:

• On an uptrending day, it sells a bull put spread.
• On a downtrending day, it sells a bear call spread.
• On a neutral day, it sells an iron condor.

Rule 16 · 30 Min

This is the same logic as Rule 16, but the trade is entered 30 minutes after the open. The first half hour is often the most volatile part of the day. Waiting lets the opening noise settle, and the trade-off is that the credit may change by the time you enter.

Implied Move · At Open / 30 Min

Instead of deriving the expected move from the VIX, this strategy uses the move the options market itself is pricing for the day. Strikes are skewed based on the overnight gap, with more room given on the side away from the gap. Like Rule 16, it comes in an at-open version and a 30-minute-delayed version.

MCStrat · At Open

This is a more aggressive, directional strategy. It sells an at-the-money vertical credit spread, either a call spread or a put spread, depending on the day's "lean." The lean is set by where SPX opens relative to the prior close, then confirmed by the 3EMA/9EMA relationship. Because the short strike sits at the money, the credit is large, roughly half the width of the $10 spread. In exchange, the trade needs the market to move in the chosen direction, or at least not against it.

XSP Implied Move · At Open

This is the Implied Move strategy traded on XSP, the Mini-SPX index, which is 1/10th the size of SPX. It's the same concept at a tenth of the dollar risk, which makes it a good fit for smaller accounts or for anyone learning the mechanics.

The Building Blocks

Every strategy above is made from vertical spreads. A vertical spread means you buy one option and sell another of the same type (both calls or both puts) with the same expiration but different strikes. There are four kinds, and the iron condor combines two of them.

One quick note on math: SPX and XSP options have a 100× multiplier, so a $0.80 credit equals $80 per contract.

Credit Spreads vs. Debit Spreads

• Credit spread: You sell the more expensive option and buy a cheaper one farther out as protection. You collect money up front. You win if the option you sold expires worthless, so time decay works in your favor.
• Debit spread: You buy the more expensive option and sell a cheaper one to reduce your cost. You pay money up front. You need the market to move in your direction.

In both cases, your maximum loss is defined when you enter the trade. That's why spreads are the backbone of every strategy on this site: you can never lose more than the width of the spread.

1. Put Credit Spread (Bull Put Spread)

Outlook: Neutral to bullish. You profit if the market stays above your short put.

How it's built: Sell a put below the current price, and buy a lower-strike put as protection.

Example: This mirrors a recent Rule 16 pick. SPX is at about 7,775.

• Sell the 7,755 put
• Buy the 7,750 put
• Collect $0.80 credit ($80)

Where you'll see it: Rule 16 and Implied Move on uptrending days, the put side of every iron condor, and MCStrat when the lean is bullish (placed at the money for a much bigger credit).

📺 Watch how to trade it: Put Credit Spreads Explained

2. Call Credit Spread (Bear Call Spread)

Outlook: Neutral to bearish. You profit if the market stays below your short call.

How it's built: Sell a call above the current price, and buy a higher-strike call as protection.

Example: SPX is at about 7,775.

• Sell the 7,800 call
• Buy the 7,805 call
• Collect $1.00 credit ($100)

Where you'll see it: Rule 16 and Implied Move on downtrending days, the call side of every iron condor, and MCStrat when the lean is bearish.

📺 Watch how to trade it: Call Credit Spreads Explained

3. Call Debit Spread (Bull Call Spread)

Outlook: Bullish. You need the market to rise.

How it's built: Buy a call near the money, and sell a higher-strike call to lower the cost.

Example: SPX is at about 7,775.

• Buy the 7,775 call
• Sell the 7,785 call
• Pay $5.00 debit ($500)

How it relates to our strategies: None of the site's strategies trade debit spreads today, but debit spreads are the mirror image of credit spreads. When MCStrat leans bullish, it sells an at-the-money put spread. A trader with the same bullish lean could instead buy a call debit spread. The risk profile is similar, but you're paying for the move instead of getting paid to wait for it. Understanding both sides helps you see why a strategy is built the way it is.

📺 Watch how to trade it: Call Debit Spreads Explained

4. Put Debit Spread (Bear Put Spread)

Outlook: Bearish. You need the market to fall.

How it's built: Buy a put near the money, and sell a lower-strike put to lower the cost.

Example: SPX is at about 7,775.

• Buy the 7,775 put
• Sell the 7,765 put
• Pay $4.50 debit ($450)

How it relates to our strategies: This is the debit-side alternative to a bearish MCStrat day. Where MCStrat sells an at-the-money call credit spread, a put debit spread expresses the same bearish view by buying the move instead.

📺 Watch how to trade it: Put Debit Spreads Explained

5. The Iron Condor

Outlook: Neutral. You profit if the market stays inside a range.

How it's built: An iron condor is simply a put credit spread plus a call credit spread on the same day, one below the market and one above it. You collect credit on both sides.

Example: SPX is at about 7,775, with an expected move of about ±72 points.

• Put side: sell 7,705 put / buy 7,700 put
• Call side: sell 7,845 call / buy 7,850 call
• Total credit: $1.30 ($130)

Notice that the max loss is based on only one side. SPX can't close both above 7,850 and below 7,700, so only one wing can ever lose. That's what makes the iron condor attractive: you collect two credits while taking on the risk of only one.

Where you'll see it: This is the go-to trade for Rule 16 and Implied Move on neutral days. The Rule of 16 expected move is what sets the short strikes. Placing them at or near the edge of the expected move means the market has to move more than it's "supposed to" before the trade is in trouble.

📺 Watch how to trade it: Iron Condors Explained

Why We Show "Actual Fillable Credit"

You may notice two credit numbers on each pick: theoretical and actual fillable. The theoretical number is what a textbook pricing model says the spread is worth. The fillable number reflects real bid/ask prices in the market, which is what you'd realistically get with a limit order.

On 0DTE spreads the gap between the two can be large. On a recent day the theoretical credit was $2.50, while the fillable credit was only $0.80. Win rates that are built on theoretical credit look great on paper and fall apart in a real account. Every P/L figure on this site uses the fillable number.

Quick Reference

This post is for educational and entertainment purposes only and is not financial advice. Options trading involves substantial risk of loss and is not suitable for all investors. 0DTE options can go from full profit to full loss within minutes. Never trade money you can't afford to lose.