Short strangle deep OTM gives low returns due to low premiums. Also, it is an unlimited risk strategy. You never know the put side can go ITM. Remember 23-March-2020 corona crash. So, better to do iron condor instead of short strangle. At least the risk is limited plus you needn't sell deep OTM. Besides, you can deploy a hedged strategy with much lower margin.
Is Short strangle of deep OTM a good strategy for great returns?
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Definitely a good intraday strategy for the weekly index options, provided
- Options strikes, Premium to be sold, Entry Time, Exit Time and SL are pre decided
- Courage and discipline to follow the plan
- Follow the same strategy for the whole week
Based on personal experience,
- Win rate of the strategy is 65%
- Expected weekly returns can be in the range of 0.20% to 1.50% including taxes and brokerage. Similarly losses could be in the range of -0.05% to -0.50%.
New trader should try out with paper trading for a month to create the required mindset, before jumping into with real trades.