Short strangles

[nwoptions]

Hi everyone, I'm new to trading options and I'd appreciate your input. I've been trading 2 short strangles recently and have had mixed results.

On Wednesday, I initiated 70/86 March 17th expiring short strangle for AMD so far with success. Today I had a $8 profit. The put is losing money while the call is making money.

On Tuesday, I initiated a 67/81 March 17th expiring short strange for PYPL. Today I had a $6 loss. The call is losing money while the put is making money.

Both stocks are well within each strike. Today PYPL closed at around 76. AMD closed at around 81.50. There's no risk of assignment.

Why does one have a profit and one has a loss?

Is trading short strangles a crapshoot?

Can you please help?

Thanks

 

[traider]

yes it's a crapshoot if you don't try to predict something better than what market is pricing in

 

[taowave]

How
Its definetly a crapshoot if you dont have well thought out plan..

Why did you sell the strangle,i.e stock looks range bound,vol was high

What is your risk reward on the trade?? When/where would you take it off if profitable??

Assuming you dont delta hedge,what's your plan if your assumptions were wrong??

Close out with a stop, roll the options,pray??

Hi everyone, I'm new to trading options and I'd appreciate your input. I've been trading 2 short strangles recently and have had mixed results.

On Wednesday, I initiated 70/86 March 17th expiring short strangle for AMD so far with success. Today I had a $8 profit. The put is losing money while the call is making money.

On Tuesday, I initiated a 67/81 March 17th expiring short strange for PYPL. Today I had a $6 loss. The call is losing money while the put is making money.

Both stocks are well within each strike. Today PYPL closed at around 76. AMD closed at around 81.50. There's no risk of assignment.

Why does one have a profit and one has a loss?

Is trading short strangles a crapshoot?

Can you please help?

Thanks

 

[GoldDigger]

Why does one have a profit and one has a loss?

Is trading short strangles a crapshoot?

Can you please help?

I have been doing regular BTD day trades for a couple
of years and recently started trading Options, so I am
not an expert, you can take my advice or leave it.

I read books and forums, watch videos, discovered a
proven system to follow, and I am learning by doing.

I think that the reason so many traders are leery of
Options is that they are confusing.

My profits have spiked when the underlying stock was
nowhere near the strike, after research found various
factors can affect performance.

Delta, volume, implied volatility, expiration date, and
maybe even time of day. I have determined that I will
drive myself crazy trying to figure out why Options
perform as they do.

I would suggest that you find a couple of underlying
stocks that provide good profits, familiarize yourself
with their historical data and Options chain, and trade
those same ones on a regular basis, to better project
how they will perform.

If you want to try something different, make sure you
know what to expect. You can always use a simulator
to test before trading.

Because the price moves so fast, you should decide
how much profit will work for you and set your limit
sells in advance, that's what I do most of the time,
but not always (greed).

Continue learning by doing, do not rack your brain
asking why this one went up and that one tanked.

Unless you are a mathematician or scientist you will
probably never get it, especially not as a beginner.

 

[BlueWaterSailor]

.
Why does one have a profit and one has a loss?

Is trading short strangles a crapshoot?

Re the P&L - options have a number of factors (greeks) affecting them; primarily, strike/spot relationship (delta), time to expiration (theta), and volatility (vega). If you don't understand those, then you're just gambling. And if you're trading without a view on the market/underlying, then - yes, it is indeed a crapshoot.

Short strangles are one of the ways to trade the belief that the price of the underlying is going to stay between the short strikes. If you have no rationale for that view, or decided to take a guess, your results will reflect that. The value of the premium between entry and expiration will vary depending on the value of the greeks. Since the path that price and volatility will take is not predictable, that value isn't either.

 

[BlueWaterSailor]

I think that the reason so many traders are leery of
Options is that they are confusing.

...

Unless you are a mathematician or scientist you will
probably never get it, especially not as a beginner.

Hint to the OP: The LAST thing you should ever do is listen to opinions like this from people who admit to knowing nothing about options and have no idea what they're doing. Especially one who has "found a proven system to follow", confirming that they don't understand anything on their own.

Depending on the structure, options can do everything including being synthetically equivalent to the underlying - meaning that the greeks won't matter at all. They can be, and often are, traded directionally - a lot of people do nothing but buy calls and puts to do exactly that while taking advantage of optionality.

But in any case, the decision about whether you trade them or not - and why you take a trade if you do - should be yours, with full understanding. It should never be due to ignorance or fear - especially someone else's.