My First SPY 16 Delta Strangle – Options

Today I entered my first short 16 delta strangle in SPY and boy is it exciting! It’s a large “undefined risk” trade. This means that the probability of success is high, however if things go wrong, then I also could lose up to infinity. If this is not a trade you want to do, there are also Iron Condors, which limit your losses, but also cut into your profits. The idea is that you sell a put on the downside, and you sell a call on the upside. Like an Iron Condor, it’s a neutral trade that allows for more than 1 standard deviation of movement over the next 37 days. My plan is to hold until I make 50% of my max profit (order for that has already been placed), or close/roll when it hits 21 days to expiration. If the market goes haywire, then I’ll have to consider adjusting by rolling in the untested side or just closing if I get to my max acceptable loss. In the image below, SPY is around 297, and my safe range is between 281 and 308. Now just need the IV to decrease and theta decay to work in my favor. [Update 10/7/19] This has been one crazy time to hold this strangle! At one point I thought it was going to breach the lower put, but it never did and returned to the middle. I’ve seen it get up to 70$ in profit, and have also seen it go below into negative territory! So far I’m hanging on and it seems to be paying off and I just need to be patient and let theta decay do it’s thing. [Update 10/11/19] Ended up closing this on the 11th of October for a profit of $121, just 9$ short of the 50% profit target of $130 (50% of $260, the total credit I collected). We at Money Vikings use tastyworks for trading options. If you are interested in checking it out, we’d appreciate you using our affiliate link

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