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neutral strategies
Short Strangles
Analyzing the risk profile of a short strangle
Recap
- Short strangles are established by selling an OTM call and an OTM put
- They are typically neutral strategies but can be skewed to one direction or the other
- Strangles carry undefined risk on BOTH sides of their profit zone
- The wider the strangle, the higher POP and the lower the profit potential
- Short strangles profit when option prices decline and lose when option prices rise
- The most you can make on a strangle is the credit you receive
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