How I Risk $300 To Make $75 Trading Strangles (93% Win Rate)
Are you curious about trading strangles and how to achieve a 93% win rate with minimal risk? In this article, I’m excited to share my approach to trading strangles with you. This strategy has not only proven to be effective but has also allowed me to maintain a remarkable 93% win rate. I’ll walk you through the key steps and parameters I use to minimize risk and generate consistent income from the market.
Understanding Strangles — A Beginner’s Guide
To start off, let’s break down what a strangle is for those who might be new to options trading. A strangle involves betting that a stock will stay within a certain price range. By selling both a call and a put option, traders can profit as long as the stock remains between the chosen levels. It’s a strategy that allows you to collect money through time decay, making it particularly appealing for generating monthly income.
The Nuts and Bolts of Setting Up a Strangle Trade
Now, let’s dive into the specifics of setting up a strangle trade. I recommend trading strangles on popular instruments like SPY or SPX. For instance, trading on SPY requires $6,000 in collateral, making it accessible for a variety of account sizes.
Here’s a step-by-step breakdown of how I structure my trades:
- Select the right timeframe: Aim for options with 45 days until expiration (DTE).
- Choose your strike prices: Sell a 10 Delta put and a 5 Delta call to establish the range.
- Manage the trade: Close the position for a 50% profit or use a 300% stop loss.
Mitigating Risks with Trending Bands
One of the crucial elements in my strategy is the use of a trending band indicator. This indicator helps me identify potential market downturns and steer clear of major crashes. By exiting strangle positions when the market breaks above two standard deviations of the 200-period moving average, I can sidestep significant losses.
Conclusion
In conclusion, trading strangles can be a powerful strategy when approached with a well-defined plan. By diligently following the steps outlined in this article and incorporating the trending band indicator, I’ve managed to achieve a 93% win rate while keeping potential losses in check.
Remember, every trading strategy involves risk, and it’s crucial to stay informed and adapt to market conditions. If you’re interested in delving deeper into the specifics of my options trading strategies, feel free to check out my free course linked below. Happy trading, and may the markets be ever in your favor!
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Thanks for reading 🙂
Austin Bouley
CEO & Chief Strategy Officer
