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Short Straddle

Short Straddle

  • date-icon 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
  • Loses if IV goes up

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