Strangle options strategy example. Description. This strategy typically involves buying an out-of-the money call option and an out-of-the-money put option with the same expiration date. Outlook. The investor is looking for a sharp move in the underlying stock, either up or down, during the life of the options. Summary. This strategy does best if the stock price.

Strangle options strategy example

Options Strangle, Straddle (Hedge) - Trading Strategies - bse2nse com

Strangle options strategy example. In this example taken from February 19, , I am using a stock that is a leader and can tie up a fair amount of capital because of its price – that is Goldman Sachs (GS). First, a few things to note to show why this stock would be interesting when considering the strangle strategy. The first, of course, would.

Strangle options strategy example


Kirk Du Plessis 0 Comments. In tonight's video, I want to go over the three new short strangle strategies that we enter today on Tuesday, December 8. Now, this is going to be a cool video because these three strangles that we entered into these three securities are very, very similar. They are almost the identical type of trade. We set them up almost the identical way, and how we went about it. It is very easy, very repetitive in what we are doing.

Honestly, it is not rocket science, what we are doing. Although it seems like it sometimes, and I get that; option trading can be hard area and hopefully, what we're trying to do here with part of this membership in doing these videos every single night is just to show you that it's just a matter of being very systematic and robotic about how you set up trades.

Right now, the market is a little bit crazy. We do not see stocks drop by any big stretch, but it's a little bit more volatile than usual, and we see some good, implied volatility out there, and we're starting to build some positions across the board. That's the only thing that we want to do is start selling premium.

Whatever manner that is for you and your account size and start building these high probability trades. We're going to start here tonight with Yahoo. Again, we did the strangle on all of these traits, but as always in our trade comments, we mentioned how you could do this trade as an iron condor or risk-defined trade. When I say "portfolio risk management" some people automatically assume you need a Masters from MIT to understand the concept and strategies - that is NOT the case.

But you do need to use simple checks and balances. Click here to view all 16 lessons? Again, with Yahoo, you can purchase the 28 puts at the 40 calls, turn this into an iron condor. Again, it has the same exact features as a strangle, except what you're going to be giving up if you turn it into an iron condor is you're going to be giving up your initial credit, right? You got to take some of this credit and purchase those options on either end, so you give up a little bit of your credit, but you can do it risk defined, and you really have less risk because now you are doing a defined risk strategy, so it's well for IRAs or more retirement accounts.

Again, for our size portfolio and what we want to do, we're okay. We're comfortable doing the strangle and keeping her position size small. In the case with Yahoo again, implied volatility, nice and high in the 68th percentile. About the 15 deltas on either end, so there are the 39 calls. We have the 29 puts down below the market. We've got a good wide range here in how far Yahoo can move. Again, we are stacking this trade on top of our existing one. You could see the markets move since we entered the trade originally, but that's all we're doing.

Again, that's very similar to what we are doing across the board. Implied volatility around the same IP rank in SOP, we sold 36 calls and 25 puts, so here inside of the platform, you can see, and again, we're doing very much the same thing on either side. That's our starting point. Again, very easy to do across the board. The last trade that we entered today is another one in P, which is Pandora. That wasn't a typo. I know there were some people that said, "Hey, you forgot the ticker symbol.

It just P as the ticker symbol for Pandora. I went ahead and sold the 17 calls and the eight puts down below the market. Pandora has an implied volatility rank that was in the th percentile earlier today. What that means is that we have to be super aggressive in getting into at least something additional on Pandora because implied volatility is at the highest point that it has been in the last year, and we have to take advantage of this.

This is an opportunity that doesn't come that often and a lot of stocks, especially a lot of these smaller stocks that are the lower price point, and you have to take advantage of these. I mean, this is where you make your money as a trader. You don't make your money when implied volatility is low.

You make your money when implied volatility is crazy high like this, and you can start to leg into and sell into some positions. Hopefully, that makes sense.

Hopefully, that gets you over that hump. As always, we are always here to help with questions. Again, let's take some time to understand what we're trying to do. There's a logic behind it. In this case, these three strangles, that's what fits our portfolio.

You could have easily done the very, very similar cousin to these, if you will, and do the iron condors. In our case, we have the margin available to do the strangles, so we're going to do the strangles. We're going to take in more money. We know, statistically, because we published our results in our report and our performance that statistically, the strangles is going to win out.

They are going to be one of our highest profit generating strategies. We're going to do that. We're going to focus on those strategies when implied volatility is high. As always, I hope you guys enjoyed these. Please let me know if you have any comment or questions. If you're watching this video somewhere else out there online or on YouTube, you just have to understand that you're getting this video into seeing these trades about 20 to 30 days after our members.

If you want real-time alerts and a video that goes along with it every single night like the one you're watching, you have to sign up for membership at OptionAlpha. Until next time, happy trading. Kirk founded Option Alpha in early and currently serves as the Head Trader. Kirk currently lives in Pennsylvania USA with his beautiful wife and two daughters.

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