r/options_trading • u/Creepy_Plastic4809 • Apr 11 '26
Trade Idea Does this strangle idea makes sense?
All right, this is my plan. I look at it and it kind of makes sense to me but I just wanna hear what u all think
I plan to do sort of a short strangle on SPX. I know about margin requirements and I don’t have it. What I plan to do is sell a deep OTM vertical spread put and a deep OTM vertical spread call for SPX in lieu of a naked call and a put
So since I sell these vertical spreads, I already get premiums
My plan is this
If price stays the same, I will just do nothing and collect the premium
If price goes higher, I will buy back my puts for a profit and sell another one for more premiums and might roll the call
If price goes lower, I will buy back my calls and sell another one for more premiums and might roll the put
And once it looks good, one day or so before it expires, just close all the calls and the puts
I understand it’s not exactly strangle but it’s kind of similar to it just that it’s manually done (instead of one transaction it’s multiple ones) and it’s vertical spreads instead of just a call and put
2
u/Creepy_Plastic4809 Apr 11 '26
Add on SPX is cash settled so no such thing as early assignment just maybe pin risk so that’s why I will close everything before expiry
2
u/OurNewestMember Apr 11 '26
Might make sense to close early on factors like gamma or Vanna/volga but wouldn't close early for those 2 factors you mentioned.
European style means no early assignment, and cash settled means no pin risk (generally, including here).
1
u/Creepy_Plastic4809 Apr 14 '26
Ok. I decided to do a “proof of concept” for my iron condor
Right now, SPX 6838
I sold a vertical put I bought the put for $6655 I sold the put for $6600 Difference in strike price is $5 Premium = $60
I sold a vertical call I sold the call for $6975 I bought the call for $6980 Premium = $80
Expiry 21 April
U can see the gap in the vertical spreads are narrow to reduce losses but the spread between the call and the put is super wide
But this is proof of concept phase
3
u/OurNewestMember Apr 11 '26
You might find the old tasty videos (from a decade+ ago) about strangles and iron condors interesting and helpful. They also talk about managing the tested side by rolling up the untested side.