Short Straddle
Components
Short one call option and short one put option at the same strike price.
Risk / Reward
Maximum Loss: Unlimited as the market moves in either direction.
Maximum Gain: Limited to the net premium received for selling the options.
Characteristics
When to use: When you are bearish on volatility and think market prices will remain stable.
Short straddles are a great way to take advantage of time decay and also if you think the market price will trade sideways over the life of the option.
Comments page 1 of 1
That's right Rudy, so it depends on your view of the underlying as to what strategy you decide.
Which is a better strategy? short straddle or short strangle? While short straddle offers more premium, short strangle has better odds for success.
Typically you would short the ATM strikes as you would be neutral on market direction.
Shoul I short the puts and longs as otm or atm?
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