Short Straddle Options Strategy

Short Straddle Options Strategy

Bywww.Options-Trading-Education.com

http://www.options-trading-education.com/

A short straddle options strategy can result in a nice cash flow when applied to

an equity that is trading sideways.

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A short straddle options strategy is when a

trader sells both a call and a put on a stock, commodity future, or

Forex currency.




Both call and put should have the same options expiration dates

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The prize in the case of a short straddle

options strategy is the premiums on both the

call and the put.




As in all options trading, those who

engage in a short straddle options

strategy need to pay close attention




to both the fundamentals that

drive equity prices and technical factors that

help the trader read market sentiment.




Over the long term, smart traders tend to make more money on selling calls and puts than on buying them.




However, options sellers forego the occasional

jackpot that comes from hitting a home run when

buying a well chosen call or put.




They also run the risk of an occasional huge loss as they are trading short

in which case the leverage of options

trading works against them.




Quiet Times versus Volatile Markets




A short straddle options strategy is

best adapted to a quiet market.




However, premiums are typically higher in

volatile markets.




The advantage of accepting a lower premium and only

trading in a so called flat market is that the

risk of loss is less.




The risk of a short straddle options

strategy in a volatile market typically keeps

those without deep pockets out of the

market.




Actively Trading a Short Straddle

Options Strategy




This strategy is best used by those

making a living trading options

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http://www.options-trading-education.com/17/making-a-living-trading-options/

http://www.options-trading-education.com/17/making-a-living-trading-options/



That is to say, a full time day trader will be

able to watch the market closely




and exit the trade at the most opportune

moment, either to maximize profits or

limit losses.




Selling puts and calls does not mean that the trader needs to stay with the trade

until expiration.




Rather, he or she can exit either one of both contracts at any time

by executing the opposite trade.




Most commonly a trader stays with his contracts until such

time as the time value of the contract

diminishes.




If the market price of the equity has not

changed




he or she can simply let the contracts

expire or exit one trade or the other at the most profitable

time.




If the equity in question moves up in price a

smart day trader will be watching and will exit

the call contract in order to limit losses.




He or she will simply let the put expire as there is little risk of

loss.




If the equity moves down in price




he or she exits the put contract in order to

limit loss and leaves the call contact alone.




In all cases it is important for those

using a short straddle options strategy to

follow the market closely.




While one can preserve opportunity both ways with a long straddle

options strategy, losses are limited to

the price of the contracts.http://www.options-trading-education.com/6800/short-straddle-options-strategy/

http://www.options-trading-education.com/6620/preserve-opportunity-both-ways-with-a-long-straddle/





If a trader does not pay attention he or

she may lose out on opportunity but losses

are limited.




When using a short straddle options

strategy, a trader must constantly pay

attention in order limit the risk of a big loss.




For more insights and useful information about options and

options trading, visit www.Options-Trading-Education.com

.



Short Straddle Options Strategy

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