How to Trade Options Strangles
Disclaimer: There are affiliate links on this page. This means that if you click through and purchase anything, I might earn a commission for the introduction with no extra cost to you.
If you are looking to profit from moves in the market but don’t want to tie up a lot of capital, or if you’re simply looking to hedge your portfolio, then trading options strangles may be the strategy for you.
A strangle is an options strategy that involves buying both a put and a call on the same underlying security, with different strike prices and different expiration dates. The idea behind a strangle is to profit from a big move in either direction.
Learn how to consistently make 4% a month selling cash secured puts in this FREE EBOOK!
Mobile Closer Raging Bull Review
Weiss Ratings NFT Wealth Builder Review
How to Trade Options Strangles: How to Enter a Strangle
To enter a strangle, you will need to buy a put option with a strike price below the current market price, and a call option with a strike price above the current market price.
For example, if XYZ stock is trading at $50 per share, you could buy a put option with a strike price of $45 and a call option with a strike price of $55.
LEARN HOW TO WIN 90% OF YOU TRADES IN 90 SECONDS!
>> CLICK HERE TO LEARN MORE! <<
The key to successful options strangling is to pick the right underlying security. You want to choose an underlying security that is not too volatile, but which you expect to make a big move in the near future.
It is also important to pick the right strike prices for your put and call options. The strike price of your put option should be below the current market price, while the strike price of your call option should be above the current market price.
Once you have picked the right underlying security and strike prices, you will need to wait for the market to make a move. If the market moves in the direction you were expecting, then one of your options will increase in value while the other decreases in value. You can then close out your position for a profit.
On the other hand, if the market doesn’t move in the direction you were expecting, then both of your options will decrease in value. In this case, you will need to wait for the options to expire before you can exit your position.
Looking for a premium indicator system that works? Check out my Lux Algo Premium review here!
Short Strangle vs Straddle Option Strategy
The short strangle options strategy is very similar to the straddle option strategy, with one key difference. When you are trading a straddle, you are buying a put option with a strike price below the current market price, and a call option with a strike price above the current market price.
However, when you are trading a strangle, you are selling a put option with a strike price below the current market price, and a call option with a strike price above the current market price.
The key difference between these two strategies is that, with a straddle, you are looking for the market to make a big move in either direction. With a strangle, you are looking for the market to be relatively stable.
The short strangle options strategy is a good way to profit from sideways or range-bound markets. It is also a good strategy to use if you are unsure about which direction the market will move.
How to Trade Options Strangles: Managing Your Risk
When trading options strangles, it is important to manage your risk carefully. One way to do this is to always set a stop-loss order for your position. A stop-loss order is an order to sell a security when it reaches a certain price.
For example, if you bought a put option with a strike price of $45 and a call option with a strike price of $55, you could set a stop-loss order for your position at $50. This would limit your losses if the market moved against you.
Another way to manage your risk when trading options strangles is to use an options strategy known as a “condor.” A condor is an options strategy that involves buying and selling four different options contracts with different strike prices.
The key to successful condor trading is to pick the right underlying security. You want to choose an underlying security that is not too volatile, but which you expect to make a big move in the near future.
It is also important to pick the right strike prices for your options contracts. The strike price of your put option should be below the current market price, while the strike price of your call option should be above the current market price.
Once you have picked the right underlying security and strike prices, you will need to wait for the market to make a move. If the market moves in the direction you were expecting, then one or more of your options will increase in value while the others decrease in value. You can then close out your position for a profit.
On the other hand, if the market doesn’t move in the direction you were expecting, then all of your options will decrease in value. In this case, you will need to wait for the options to expire before you can exit your position.
Learn how to consistently make 4% a month selling cash secured puts in this FREE EBOOK!
How to Trade Options Strangles: Conclusions
Options strangles are a great way to profit from moves in the market without tying up a lot of capital.
However, it is important to pick the right underlying security and strike prices. Additionally, you will need to be patient and wait for the market to make a move before you can close out your position for a profit.
LEARN HOW TO WIN 90% OF YOU TRADES IN 90 SECONDS!
>> CLICK HERE TO LEARN MORE! <<
Related Articles
Is Nishant Pant $25k Challenge Legit?
Selling Weekly or Monthly Put Options for Income
Selling Options as A Side Hustle
Jason Bond Lightning Alerts Review (REAL SUBSCRIBER)
