Additional Thoughts
When managed properly, strangles can be one of the most effective methods of capitalizing on elevated premium levels in high implied volatility environments. I personally rely on strangles more than any other strategy because of their versatility, cost efficiency, and defensive capabilities. While the initial setup is fairly straight-forward, they can be customized down to a very deep level. Advanced traders will enjoy the balancing act of intrinsic and extrinsic value, delta risk, and probability of profit.
As with any trade, and especially undefined risk strategies like strangles, be sure to keep the size of your trades small. Strangles are highly effective for many reasons but they certainly have the potential to cause some major damage if the underlying is too expensive or too volatile for your account size. We will discuss much more about proper sizing, defense, and management techniques in a future article. For now, the goal is simply to understand how the pieces come together to form the initial setup.