When it comes to Options Trading, there are different complexities involved in terms of choosing a specific strategy that works the best for you.
At the same time, each strategy has its own set of advantages as well as limitations, thus making the concept of options trading even more challenging. Thus, in case you are looking to fit a particular strategy in your option trades, just check few areas before you make a choice.
In this detailed comparison of Long Straddle Vs Short Strangle options trading strategies, we will be looking at the below-mentioned aspects and more:
Current Market Position
Your Risk Appetite
Your Trading Experience
Intention and Expectation of a trader
Break-even point of your trade
Apart from the Long Straddle Vs Short Strangle strategies, there are more than 25 comparisons of each of these strategies with other option strategies. With all these comparisons, you should be able to filter the ones that work the best for you.
Here is the detailed Long Straddle Vs Short Strangle comparison:
Long Straddle comes into play when the trader expects the market to move sharply, however, the direction of the movement cannot be predicted. The purpose of the strategy to allow the traders to benefit from volatile markets...more
The short strangle options trading strategy is an excellent strategy to be deployed when the investor is expecting little to no volatility in the market...more
The trader should be able to trade based on his/her conviction that the markets will move, without being concerned about the direction of the movement.
If the prediction does not come out true, the strategy can cause unlimited loss.
Strategy Level Suitable for
Number of Positions
1 ATM Call, 1 ATM Put
1 Short ITM Call, 1 Long ITM Call, 1 Long OTM Call, 1 Short OTM Call
Risk for You
Break Even Point for Investor
Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call + Net Premium
Lower Breakeven = Lower Strike Price + Net Premium Upper breakeven = Higher Strike Price - Net Premium
Put & Call Options Expire Worthlessly
Stock price remains between the 2 option Strike Prices and the options expire worthlessly
Thus, with this, we wrap up our comparison on Long Straddle Vs Short Strangle option strategies.
At the same time, if you are in a neutral market situation and have a limited risk appetite, then Short Strangle is a potential option strategy for you. Generally, this strategy is suitable when you are sure that there is going to be low or no market volatility at all.
The strategy comes with a limited profit potential.
However, if you are in a neutral market situation and are looking for unlimited profits from your share market trades, then you can opt to go for the Long Straddle strategy.
There is a limited amount of risk involved as well, however, there are good chances of high profits if the strategy is executed well.
Furthermore, as told above, it also depends on the market situation.
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