Best Short Strangle Adjustments: 3 Short Strangles

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[@bmwman5]

Good one Mike, loved it. Very interesting. 👍

[@ashishjain4132]

U are doing good work mike,could you please make a video on more better use of strip or strap.

[@EugeneHaroldKrab]

freaking AWESOME video. Thanks mike!

[@arunkumaran2155]

Thanks for the video Mike... Very Informative

[@barryladerman179]

Good presentation. However, I would like to see you include amt of cap tied up in the trade. If you need 10k to keep a trade on that pays $150 it's pretty inefficient. Especially w/ a smaller acct.

[@kamleshkumardoshi5087]

Great. Very well presented and explained

[@simranjeetsingh3592]

Thanx. thats helpful Mike

[@lovekaushik2000]

very informative video..loved it

[@shrimalhitesh06]

Would you initiate the strangle yaad at once or should we execute like this- first execute call sell when it's at highest, then execute put sell when it's higher so that we can maximize the credit we receive?

[@hrushikeshbehera2483]

Nice What if market gap up or down significantly beyond range? How to adjust the trade?

[@butterflybutterfly4463]

Love your videos 🙏

[@saurabhjain7672]

Mike, how do I find one SD price on both call and put side. Is it visible on tasty trade platform?

[@jaemisboker3288]

Hi, Thank you for Great Content. How to chose OTM strike price of the Strangle ?

[@tastyliveshow]

Typically we start around the 16-30 delta and go from there based on risk tolerance and liquidity in the strikes, but liquidity is very important and should push you towards a more narrow range of potential selections.

[@sedul2006]

Hi Mike, when would we consider a side Tested - When it touches the STrike or the BE? And When would we consider rolling the untested side to get to get a credit to help with the BE's? Say 1) Original Strangle was 30 DTE and now we are being tested at 25 DTE or we're tested because we left it on until 7-12 DTE 2) Original Strangle is a quick strangle on Earnings with 4-7 DTE, and one side is getting tested. Consider just closing it all together?

[@tastyliveshow]

Here's a segment that should help - www.tastytrade.com/tt/shows/trade-managers/episodes/strangle-management-01-29-2018

[@chanzw]

For the last strategy, why would you sell a new call ATM 70 ? if your view is still range bound going forward (i.e. between 70-80), u run the risk of call assignment anytime before expiry.

[@tastyliveshow]

It's just an example of what you can do if you wanted to - the last example shows the powerful downside hedge when rolling to the same strike, as the credit is so large. As long as there is time in the trade and the option isn't too far ITM assignment risk is lower - This is especially true in higher priced underlyings, as strikes have a ton of extrinsic value all the way through expiration. When people exercise their options they give up all extrinsic value, so I like to use that as a gauge.

[@lockirocu]

Thanks for this. Do you ever just take the loss on a strange? Or do you just keep rolling it forever?

[@tastyliveshow]

We can certainly take a loss on a strangle rather than manage it forever. It all boils down to your assumption on the stock price and risk tolerance, and if that changes and doesn't reflect the trade you have on, there's nothing wrong with shutting it down. Here's a segment on managing loser: www.google.com/url?client=internal-element-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/market-measures/episodes/manage-losers-08-19-2016&sa=U&ved=2ahUKEwifhPHhodnoAhUHXM0KHQkiB5UQFjABegQIBBAC&usg=AOvVaw0HfYASEKIqSqnQEKStVhiC

[@tejasdesai8023]

thanks mike

[@tarubewildin6931]

if you sell a credit straddle atm isn’t the max profit at the strike you sold at?

[@swapnilkoshatwar1656]

Hi Mike I am from india I like your explanation

[@patricksuwala4090]

Im not quite understanding this rolling of the untested side down or up. If you only roll the untested side, doesnt that mean you now have two completely seperate options trading on different expiration dates? How does that work? I dont even think I can just roll one side on my platform. Or are we rolling both sides, where we bring the untested side closer, and roll out the tested side, just at the same strike?

[@loubob21]

Hello Mike. Love your video and enjoy your clear instructions. Question, when we sell a strangle at 16 deltas, the call side give much less premium. Should we adjust the call delta to equalize the credit received? To make the credit equal on both sides? Thanks

[@tastyliveshow]

I typically don't - with such strong put skew, I often just sell the put and get rid of the risk on the upside, or alter it to create a jade lizard where there's no risk to the upside - no reason to take on a ton of risk to the upside, especially in a relentless bullish market. Totally up to you though!

[@loubob21]

@@tastyliveshow Thanks for the reply. I agree 100% upside risk has been brutal.

[@TraderBright]

does this adjustment work for intraday as well ?

[@ravishankark4453]

nice video thanks from india

[@narinderkumar8597]

Hi mike, Thanks for sharing your knowledge

[@varunshetty9497]

Hi Mike. What should I do if my one position in strangle strategy goes deep in the money . How do I adjust that .

[@tastyliveshow]

Hello! We would have managed prior to that - we typically adjust to keep our delta in check - here's an example of things we might consider doing: www.google.com/url?client=internal-uds-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/trade-managers/episodes/strangle-management-01-29-2018&sa=U&ved=2ahUKEwignKC5v4_kAhUS7J4KHatGBTgQFjAAegQIAhAC&usg=AOvVaw2EHM38piqTs33OMN_j2DkY

[@vfxhouse6499]

@10:23 "its goes from 80 to 69 in 20 days..." What if it did this huge move in ONE day rather than 20? would you still make this move or is it better to let it play out for x amount of days before you roll the untested side?

[@tastyliveshow]

If a big move happens quickly, my decision is typically based on the new delta that I have, and the value remaining in the untested short option.

[@anuragpriyadarshi970]

What if the tested side becomes in the money due to sudden spike and losses start-up piling up at a blistering pace. Do we still need to stick with the losing side and keep rolling up/down our untested profitable side till it becomes a straddle or till our capital is not blown out?

[@andrewmunlin2115]

Me personally I would roll both sides if its that's close to my tested side. Unless you dont mind being assigned

[@hrushikeshbehera2483]

Have you arrived at any solution to your question. I am having the same doubts.

[@Omkar14007]

Check for the greeks... Delta should be almost same on both sides... If not... Select new adjustment to match the delta...

[@ipoinfo9060]

Book loss n move to new trade in next expiry

[@kevinpaolillo3549]

I have bought some time when a stock is charging to the upside, capping loss by buying the actual stock to cover and selling new calls further out at a higher premium. If I get assigned at least I have the shares to cover, and then I have extra premium and a little time to decide what to do next. My Hope is for a down day at some point before next strike date where you can buy stock to cover the new call and sell another out of the money put.

[@johnmclaurin2356]

But did it not cost to close out the call at the 90$, or did the credit from the 81$ call offset closing the 90 at the 26 dte?

[@tastyliveshow]

The latter - when you're rolling up or down, or even out in time, you're just closing the current option and opening a new one. in this case, that would mean buying back the 90 and selling the 81 for a NET credit, meaning the credit from the 81 is more than buying back the 90. This offsets risk to the downside a bit, but also increases risk to the upside since the short call is at 81 now instead of 90. It's a tradeoff.

[@satyajh]

What do you do when the price moves rapidly toward the tested side and IV rises as well which does happen. Say the call side is being tested, in such a situation ive seen the call premium double and triple in a period of 5 days with gap ups( agreed it's not typical behavior). Here the put premiums fall very slightly, so rolling up the put side can never compensate the loss in the call side and deploying a new strangle too would not cover the loss you are incurring on the call side. Your thoughts?

[@shaharlevytaiji]

Take a loss. Adding to everything that was said on the video, I Always put a stop-loss on both the call and the put, With a maximum loss I’m willing to take. I found out that if I need to adjust more than once, maximum twice, than I will just dig a hole for myself. So I just limit my loss.

[@AlessandroFreddo]

in the 1st case is better keep the same Strike and get more premium instead of wider strike, why not? (I know I would get higher risk)

[@tastyliveshow]

That's totally an option! That's just the tradeoff - closer strikes offer higher premium, but you have more proximity risk to the stock price. Wider strikes offer less premium, but are further from the stock price. On an IV contraction, you might see a higher % contraction in the wider strikes compared to the closer strikes, but you could see a bigger MONETARY contraction in the closer strikes, since they're worth more in the first place. It's all just a tradeoff!

[@phildesai309]

You are the best

[@ujwalharrithas1586]

Does these techniques apply to intraday trading as well?

[@tastyliveshow]

These adjustments can be applied to any timeframe - it's mostly about delta management, which changes in all expirations as the stock moves.

[@anitaugale8029]

pl make video on short straddle

[@tastyliveshow]

Here are a few segments I have done on the straddle: www.tastytrade.com/tt/search?utf8=%E2%9C%93&search=straddle+whiteboard&commit=Search

[@user-fg7np2im6q]

good

[@stockoptions1731]

what happen if i sell both ITM(not OTM) options in strangle strategy

[@tastyliveshow]

That is what we call an inverted strangle. The credit is much higher, but you would have to buy back those options for their intrinsic value at expiration. For example if I sold a 50 put and a 40 call for $11.50, I would have to buy back that spread for $10.00 at expiration, so my max profit is only $1.50. It is a very similar idea, but you would have to deal with ITM options instead of OTM options.

[@siddharthg4623]

@@tastyliveshow what will be the effect of Gamma on Premium of this ITM option considering we will carry this trade to expiry??

[@edwardlee6826]

Hi Mike, thanks for the video. I can understand the concept of moving the untested side down to earn more credit and increase the breakeven points; but would this not be quite risky especially in a trade with no defined risk? If the market moves sharply downwards like it has in the past 2 weeks and goes way below the short put on one end of the strangle, wont the loss be huge if we don't move the tested leg down as well? Of course if the market does bounce back and lands within the breakeven points all is well and good; but that is often only available in retrospect? If there is a black swan event or the market doesn't recover, would it not be safer to just move the tested leg down as well (move both legs like making a new trade)? While you will have to accept that loss on the leg that is breached, at least you define that loss and limit a further loss by moving the tested/breached side far OTM?

[@tastyliveshow]

It's certainly a fair strategy, but we consider it when the put is ABOUT to be tested - once the put goes ITM, intrinsic value makes it almost impossible to roll down and back OTM for a credit, especially when it's really far ITM. We can roll an ATM option out in time and also down for a credit, which is our best case scenario. Rolling for a debit reduces our initial credit, increases our risk, worsens our breakeven, and now we're in a low POP trade overall, which is why we avoid rolling for debits.

[@edwardlee6826]

I see, thanks very much for the very helpful explanation. Just a further clarification- does that mean that I can recentre the trade by moving both the tested and untested legs either at breakeven or for a credit, I should (when the put is about to get tested)? My main worry is that with strangles, the loss is undefined and hence if the movement goes way ITM and does not come back the losses might be huge, especially when trading futures. By rolling the tested side down (even if it is for a debit) would it not help to define the loss with the goal being to aim to breakeven instead of profit? And when rolling we can just roll it to make a very wide strangle (perhaps at 1.5-2 SD out) to prevent the losses from compounding?

[@tastyliveshow]

@@edwardlee6826 In some cases you can - it usually results in a more narrow distance between the strikes, but this can be done in high IV stocks BEFORE the strike goes ITM. Here's a segment where we went over this recently: www.google.com/url?client=internal-uds-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/market-mindset/episodes/roku-anatomy-of-a-trade-07-17-2019&sa=U&ved=2ahUKEwiklO7f_P3jAhVZOs0KHS1OCRsQFjAAegQIAxAC&usg=AOvVaw2SqV9X9cJbM_MFpg-kbPAm

[@Pradipkadam123]

WHAT IF UR TESTED SIDE IS ITM AT EXPIRATION ?

[@tastyliveshow]

If held through expiration, your option would turn into shares of stock. Long or short stock would depend on what option type was held through expiration.

[@Huckleberry500]

Your max profit couldn't be $1.95, right? You had to buy the 90 call back and you would lose some premium there, am I seeing this right?

[@ofir7771]

I have a strangle position I opened just a couple of days ago and it already pinched through my call side back then went back insdie the range again. IV went up from 14.5 to 27.4, I still have 50 days to expiration. Should I wait? or adjust now, and if so, what would be the best strategy? Here's the position: Ticker:WBA STO 52.5 STO 40 ... It's trading now at about $51

[@Wordsalad69420]

This is bad. Rolling your positions ad nauseum is guaranteed to lose you a lot of money. This is why I only sell strangles on stock I wouldn't mind owning. I never roll. If I get assigned, that's cool. If price goes up and approaches the call strike, I just buy the stock and cover myself. If it gets called, great. If it goes back down whatever, I'll just sell another call at expiration.

[@rj2175]

Nothing extraordinary

[@alexanderchaihorsky4605]

Can’t you talk slower and allow your listener to absorb the idea?