Some times inverted strangles are meant to reduce losses. When total credit collected is greater than width of inversion, we look to take profit at 50-75% of potential profit.
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When To Take Profit For Inverted Strangles
Inverted Strangles
Good video by Dr Jim that introduces inverted strangles.
Key points:
- First move untested side to same strike as tested strike -> becomes a straddle
- Price continues to move against us. Move option leg that we moved previously to where price is currently (ATM).
- Roll inverted strangle out multiple times to collect as much premium to offset max loss which is the width of the inverted strangle.
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Odds When Selling Options
Calendar Spread Default
Calendar spread default:
- looking at selling 40 delta.
- Never pay more than what short option cost.
- Take profit at 10% of what we paid for Calendar spread.
Watch full video here.
Guidelines to Setting Up Ratio Spreads
For Put Ratio Spreads, sell 25 delta Put, long Puts depends of amount of credit we want to collect. No guide for long Puts.
The opposite is true for Call Ratio Spreads. Just that sell 30 delta Call instead of 25 delta.
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Default Iron Condor
Heard Sosnoff: Default goto iron condor is 23-25 delta and 1/3 width of the strikes.
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When to Roll Strangles
Roll when strike is breached. Sell strangles at 16 deltas and roll to 30 deltas.
Watch full video here.
Strangles During a Selloff
During a selloff, stick to selling underlying IVR > 50 and managed early.
20 Percent Freedom 