Short Strangle
Net credit with a sideways stance
A thread 🧵
#options #trading
1/ Short Strangles
As the name suggests, you need to sell options in this strategy
It involves 2 legs:
Short OTM CE
Short OTM PE
2/ Stance
You expect the market to trade within a narrow range. A narrow range means low volatility and hence lowering option premium due to theta decay
3/ Net Credit Strategy
Shorting options means that you will receive premium
Ex Nifty spot 16200
To create Short Strangle
Short 16300CE @92
Short 16100PE @132
Total premium received = 92 + 132 = 224
4/ Maximum Profit
The max profit is the premium received at entering the strategy, possible when the market expires within or at the selected strikes
In the Ex, expiry at or between 16100 or 16300, means options go worthless due to theta decay and you receive 224 points per lot
