Short strangle

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The short strangle is a neutral-outlook options trading strategy that involves the simultaneous selling of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying security and expiration date. It is a limited profit, unlimited risk strategy that is taken when the options trader thinks that the underlying stock will experience little volatility in the near term. The short strangle is a credit spread as a net credit is taken to enter the trade.

[edit] References

• McMillan, Lawrence G. (2002). Options as a Strategic Investment, 4th ed., New York : New York Institute of Finance. ISBN 0-7352-0197-8. 

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