FInance major here. Learning about option strategies and spreads etc. I am taking a course in which I have to utilize option strategies. I am quite a fan of the short strangle strategy (though I lost a lot when using the strategy incorrectly recently in a simulated portfolio for my course project on stocktrak).
Anyways. I am thinking about using it more correctly this time. Tomorrow GM for instance is going public with its IPO. It is speculated that Ford is going to benefit from this. Really I don't care whether or not ford does. I am thinking about doing a short strangle on it at market open. Im thinking: sell 10,000+ contracts on call F101120C00019000 priced at .02 with exercise price of $19.00 and sell $10,000+ contracts on put F101120P00015000 priced at .03 with exercise price of $15.00.
(if you do to yahoo finance and look at ford option chains in straddle view itll be easier to see).
These contracts expire this Friday. So I expect the prices of Ford to be relatively volatile just not as volatile as many might expect. I think that the Stock price will fall between $15-$19, the options will expire worthless and my profit will be the premiums received.
So my question is: Is this a very risky strategy, I mean what is the chance ford will go up or down $2 in 2 days? Would an Iron Condor Strategy be safer (two credit spreads)?
Anyways. I am thinking about using it more correctly this time. Tomorrow GM for instance is going public with its IPO. It is speculated that Ford is going to benefit from this. Really I don't care whether or not ford does. I am thinking about doing a short strangle on it at market open. Im thinking: sell 10,000+ contracts on call F101120C00019000 priced at .02 with exercise price of $19.00 and sell $10,000+ contracts on put F101120P00015000 priced at .03 with exercise price of $15.00.
(if you do to yahoo finance and look at ford option chains in straddle view itll be easier to see).
These contracts expire this Friday. So I expect the prices of Ford to be relatively volatile just not as volatile as many might expect. I think that the Stock price will fall between $15-$19, the options will expire worthless and my profit will be the premiums received.
So my question is: Is this a very risky strategy, I mean what is the chance ford will go up or down $2 in 2 days? Would an Iron Condor Strategy be safer (two credit spreads)?