In stocks, it’s usually “up or down.” But when prices stall, both bulls and bears hit “dead time.”
Big moves aren’t the norm. In choppy markets, you can use time as a weapon with neutral plays like straddles or strangles.
📘 In The Options Handbook, straddle and strangle strategies are explained like this:
▶ Short Straddle – Higher Income, Tighter Range 🤔
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When to Use: You expect very low volatility
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Structure: Sell a call and a put at the same strike price on the same expiration date
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P/L Example:
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Sell a $100 call for $5 premium. Sell a $100 put for $5 premium. Both expire the same date.
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If price stays between $95–$105, you keep some or all of the premium.
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If it lands exactly at $100, both options expire worthless, you keep the full $1,000.
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But if the stock drops below $90 (100–5–5) or rises above $110 (100+5+5), losses begin. And if it keeps moving, those losses grow fast, especially on the upside, where risk is technically unlimited.
▶ Short Strangle – More Breathing Room, Less Premium 🤔
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When to Use: You expect moderate, controlled moves
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Structure: Sell a call and a put at different strike prices on the same expiration date
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P/L Example:
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Sell a $105 call for $3 premium. Sell a $95 put for $3 premium. Both expire on the same date.
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If price stays within $95–$105, both options expire worthless, and you pocket the entire premium.
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If price rises above $111 (105+3+3) or falls below $89 (95–3–3), premiums can’t cover losses. The further it strays from your strikes, the greater your losses.
▶ Summary 🎯
Both are about collecting time value. You're selling options that lose value as time passes. You’re anticipating that the stock price will remain relatively stable until the options expire.
💡 The Options Handbook also includes P/L charts for both strategies—clear at a glance. Now available in the Tiger Coin Center! 🐯
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>> Click here for the Simplified Chinese version <<
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