I'm new to trading options, and I've been doing a strategy for the past few months that's given me some success. I don't see much risk, and it seem like it's "too easy", which is why I think I'm overlooking something.
I sell a put below current stock price, and sell a call above current stock price...basically betting that the stock will stay between these two prices, and both options will expire worthless.
My way of managing the trade day to day is that if the stock price falls below where I sold the put, I short the stock (at the put price) until it goes back into my "range" when I then cover.
Inversely, if the stock price goes above my call price, I go long on the stock. If it goes back below my call price, I sell the stock.
If it's out of my range at expiration, my owned stock will get called away, or my short stock will be covered since the put I sold is in the money.
I always have the cash in my account to cover the need to either buy the underlying stock, or short the stock. And, of course there is overnight gap risk which I'm exposed to, but am I missing anything else?
Thanks
I sell a put below current stock price, and sell a call above current stock price...basically betting that the stock will stay between these two prices, and both options will expire worthless.
My way of managing the trade day to day is that if the stock price falls below where I sold the put, I short the stock (at the put price) until it goes back into my "range" when I then cover.
Inversely, if the stock price goes above my call price, I go long on the stock. If it goes back below my call price, I sell the stock.
If it's out of my range at expiration, my owned stock will get called away, or my short stock will be covered since the put I sold is in the money.
I always have the cash in my account to cover the need to either buy the underlying stock, or short the stock. And, of course there is overnight gap risk which I'm exposed to, but am I missing anything else?
Thanks
:eek: