Premium selling
Short straddle
Sell the at-the-money call and put on the same strike.
How it works
You collect two premiums at once and keep them if the index finishes near where it started. Time decay works for you every day the index sits still, and it decays fastest in the final days before expiry, which is why this is usually put on close to expiry rather than weeks out.
What it costs you when you are wrong
The loss is unbounded in both directions. One gap opening can cost several times the premium collected, and no stop-loss evaluated on a daily close can protect you from a move that happens overnight. This is the single most dangerous structure in this catalogue.
The position
- 1Sell the call at the money
- 2Sell the put at the money
- Enter
- 4 trading days before expiry
- Exit
- hold to expiry
- Legs
- 2
Test it yourself
This runs against real historical market data. Nothing is uploaded, nothing is stored, and the result is not a prediction — it is what this rule would have done, on that index, in that year, with the costs shown.