SHORT STRANGLE (Sell Strangle) | neutral strategy

Short Strangle

Example: Sell 1 call with higher strike; sell 1 put with lower strike
Market Outlook: Neutral
Risk: Unlimited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Two BEPs 1. Call strike plus premium received 2. Put strike minus premium received

The short strangle, also known as sell strangle, is a neutral strategy in options trading that involve the simultaneous selling of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.

The short strangle option strategy is a limited profit, unlimited risk options trading strategy that is taken when the options trader thinks that the underlying stock will experience little volatility in the near term. Short strangles are credit spreads as a net credit is taken to enter the trade.

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