Selling Strangles Masterclass
Overview (Pros And Cons)
What Markets It Who This Strategy Cons Of This Trading Account
Works Best In Works Best For Strategy Size and Limits
- Slow markets - Someone who - One side of your - Need full margin
- Sideways markets wants slow consistent strangle tends to get approval
profits and believes hit which means your - /ES uses about
that the market is not stop tends to get hit $6,000 in buying
going to move big in more often than power
any one direction bullish strategies - SPY uses about
$10,000 in buying
power
How The Strategy Is Constructed
● Naked Put
○ Selling a put around 5-20 delta creates the lower price point that you don’t
want the asset to go below
● Naked Call
○ Selling a call around 5-20 delta creates the upper price point that you don’t
want the asset to go above
● Combining these two strategies is called a Strangle which profits when the
assets stays in between two price points
● Days Until Expiration (DTE)
○ 45 - 120 Days
How To Manage The Strategy
● Early Management
○ TastyLive research recommends to manage the position at 21 days
(meaning that you exit the position when there are 21 days or left in the
trade until expiration)
● Take Profit
○ You typically manage your profits between 10 - 50%
Best Practices For This Strategy
● Structure
○ Short Put - Sell the 10 delta put
○ Short Call - Sell the 5 delta call (more room to the upside)
○ 45 DTE
● Management
○ 21 days until expiration
● Take Profit
○ 50% based on the initial credit received
How To Automate The Strangles Strategy
Step #1: Connect your broker account to the
Options Auto Trader
Step #2: Click on “Create An Auto Trader”
Step #3: Select the “Selling Strangles” Strategy
Step #4: Setup the strategy following our best
practices or based on how you want to trade it
Step #5: Set entry rules so that the Auto Trader
knows how often to enter and when. Make sure
to factor in the buying power that you have
available.
Step #6: Set the early management and take
profit management that fits your risk tolerance
preferences.
Step #7: Set the buying power allocation (aka
how much the Auto Trader is allowed to trade
with) and any other account safeguards that
you want in place.
