Short Straddle
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Sep-12-2024
Short Straddle
Market View
Range Bound, Not moving
The Trade
Sell a Put and Call at the same strike near the stock price. Your view is that the stock will not go up or down
Premium
Receive
Margin
Required
When To Do
- When the stock stays still and expires near the sell option strike.
- Avoid trending markets
- Avoid selling low IV
Pros
- Make money if nothing happens
- Delta Neutral – Immune to small moves
Cons
- High loss if market moves a lot in one direction
Time and Volatility
- Gains time value every day