The easy math

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Hey traders how are you today?
If your new here welcome
The markets delivered a surprise reversal today
$DJI ( ▼ 0.15% )  
$SPY ( ▲ 0.06% )  
$QQQ ( ▲ 0.13% )  
$IWM ( ▲ 0.92% )  

Yesterday I said that we were going back to using Strangles as our strategy of choice for the moment. They produce well in times of market volatility or uncertainty. They’re popular to use for earnings events given that a trader enters w/o paying too much in premium…. So there is a “timing” factor with these
Today mid morning I wrote you with $NVDA ( ▲ 2.99% ) and we used a Strangle. That trade is doing okay, lets see where it goes from here
Well not any more than 30 minutes later a trade that is familiar to me fell right into my lap
The stock is $COP ( ▲ 4.21% ) it Gapped Up this morning on news of IRAN as did many other oil stocks
On Friday it closed at $113.5
It opened today at $119.00
It then slid down to $115.80
That’s still up on the day from Friday
Right place / right time…. I saw it right as it crossed north of $116.00 and grabbed it
What I want to share today is the math on the Strangles
Again, this strategy has a timing element ( most do, but this one even more so )

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The math is easy. Price was above $116.00 after it had retreated from $119.00 and started to bounce from $115.80
I bought the 115 Put
And I bought the 117 Call
Now we’re “Strangled”
The BIGGER THE MOVE THE BETTER
The direction does not matter, we just want movement
We use these most often when we don’t have a directional bias, times of market volatility can remove our directional bias

Strangles are more expensive than Bull Call Spreads, but they serve a different purpose and can be used when other strategies cant

Price closed the day at $118.22
The total cost of this trade was $900.00 per contract
The contract includes both sides, not just one
Well right now for every Put contract I bought I’m down $10.00
But for every Call contract I bought I’m up $85.00
Seeing the math? This should illustrate how we want Strangles to look when they go our way, meaning they’re moving
COP just hit $119.00 again here in the AH

As we move forward there’s no telling if these are what we stay with or when we go back to Bull Call Spreads, but this morning they were the safest play out there
And the one day profits weren’t to bad either

The Options Coach