Premium selling
Short strangle
Sell an out-of-the-money call and an out-of-the-money put.
Index stays in a rangeOpens for a creditTraded options beforeLoss uncapped
How it works
The same idea as a short straddle but with the strikes pushed apart, so the index has room to move before either leg matters. You take in less premium in exchange for a wider band in which nothing goes wrong.
What it costs you when you are wrong
Still unbounded on both sides. The wider strikes make small losses rarer and large ones no less severe — the tail is the same shape, you simply meet it less often, which is exactly what makes it easy to underestimate.
The position
- 1Sell the call 3 strikes out of the money
- 2Sell the put 3 strikes out of 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.