There are a few spreads that I trade each month to create monthly income. They are all easier then you think. Below I have given a brief description on each one.
Butterfly- This spread as three parts, the center short strike, one high long strike and one low long strike. Butterflies are Vega negative and typically they are negative delta in the first few days of setting. There are a few ways to manage risk when trading butterflies. The easiest way is to add another butterfly to expanded the bell curve. You can also roll strikes up or down to create more of an iron condor position. You can even adjust with a calendar/time spread if Vega is popping and the market is correcting. This is may favorite trade and I make the most money trading these each month.
Calendar- Time spreads are great, whether needing to hedge Vega risk or trying to catch a move higher in volatility. Its a basic short front month long back month same strike spread. Adjusting is a bit more straight forward, more of a simplistic approach, whether vols go up or down. I like to trade calendars when I think vols are going to pop or when vols have been on the low end of the range. Time spreads can be more about timing them other spreads, if you time it just right vols will reward you with premium.
Verticals- The most basic of spreads. Whether directional, hedging or part of a covered call strategy, verticals can at times be frustrating, but if traded right they can be very rewarding.
Strangles- A bit risk and margin, but a high probability trade that can really make you some $$. Strangles are basically an iron condor with out the longs wrapped around the shorts, just shorts. By now buying the longs you are able to make the strikes a lot wider and hence higher probability. If you do trade these make sure you have a management plan in place before you go strangle crazy.
Straddle- Like a strangle, but both strikes are the same. I like todo these spreads went ATM options are expensive. But the time frame that I will trade straddle is 20-15 day till expiration.
Collar- This is a great trade that takes the combo of a covered call and adds a protective put. Its a great way to hedge a position and is also a great way to make monthly income.