The ZEBRA strategy (Zebra), short for zero extrinsic back ratio, buys two in-the-money (ITM) options and sells one at-the-money (ATM) option to mimic the payoff of a stock position without the unlimited losses. The call Zebra is long 100 deltas like a long stock position, and the put Zebra is a short -100 deltas. The extrinsic value of the spread is zero so the break even is the stock price at entry.

Below are the top ranked SPY Zebra spreads.


Spread #10 has the lowest Theta and a break even of about where the stock price is now.


Breaking down the calculations shows that there is $3.16 of extrinsic value for the trade.

Stock Price $384.75        
Quantity Strike Price ITM Extrinsic Total Extrinsic
2 360 $33.57 $24.75 $8.82 $17.64
-1 388 $14.48 0 $14.48 ($14.48)
    $52.66     $3.16



To set up a Zebra scan, select the 1x2 backspread. Select your desired days to expiration range. Typically, the Zebra has two long 75 delta options and one short 50 delta option.


The default Leg Relationship of the strikes will need to be adjusted.



Set the Spread Delta to around -1 for the put Zebra as below, and +1 for the call Zebra.


A put Zebra trade with payoff and greeks is below:



Backtesting the call Zebra shows that the strategy works best compared to long stock in down markets. The strategy has a lower drawdown but long stock has better returns, Sharp and Sortino.



The put Zebra since 2017 is about the mirror image since the delta is -100.


More reading...