The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about how to adjust short strangle option strategies. As a basis, short strangle option strategies are a strategy in which you are selling a call option and a put option out of the money from where the stock is trading. For example, if a stock is trading at $100, you might sell the 105 call option and the 95 strike put option and the idea is that the stock trades between your strike prices and you profit at expiration with a stock not breaching or breaking out of your strike price range. In our case, we want the stock to trade within a $10 range between now and expiration. Now, the trouble comes in when the stock starts to challenge one side of your position. Instead of the stock staying exactly where it should be at $100, it starts to move higher towards 105 or starts to move lower towards the 95 strike. And so, the idea behind adjusting is that we first do not move the challenged or tes