A variant on covered short straddle, where risk is high and reward is limited, but it differs in that the put is out-of-the-money and its strike price is below that of the call. However, the covered short strangle is less risky than the covered short straddle. In bullish market conditions, the position’s upside potential is higher than its counterpart. The short put, also, will move further away from the strike, rendering it more likely to expire out of the money.
Derivatives
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