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Asked a question last year

Is Short strangle of deep OTM a good strategy for great returns?

Nageswara Rao Gattineni
It will definitely a very good strategy for great returns in the long run. I have recently lost heavily by selling near OTM options due to the volatile market conditions. Since then, I have started selling deep OTM options and I'm making consistent priofits since then with more than 95% chance of getting profit. The retuns can be 2% a month on deployed capital which is really decent without a question.

Advantages of selling deep OTM options.
1. No need to watch the market minute by minute.
2. Good probablity of winning.
3. No need to many adjustments. Can adjust if needed easily to get even higher returns. Market gives good time to react in case of violent moves.
4. Almost 99% lose money in stock market. By selling deep OTM options, you will difinitely be in that 1% of people who make money from the market.
5. Peace of mind is guaranteed.
6. Quality of life gets improved.
7. Can spend good amount of time with family and on other things.

Making 2% returns in a month will translate to more than 25% return in a year, which is very decent.
Herojit Singh just sell near otm and hedge with other omt...Do adjustment if necessary

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Strategical Investor

No, because the premiums would have been already very low and theta decay will also be very less.

This answer won 100 Reward Points

I basically have survived by recognizing my mistakes.

Definitely a good intraday strategy for the weekly index options, provided 

  1. Options strikes, Premium to be sold, Entry Time, Exit Time and SL are pre decided
  2. Courage and discipline to follow the plan 
  3. Follow the same strategy for the whole week

Based on personal experience, 

  1. Win rate of the strategy is 65%
  2. 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.  

Sujit Chakraborty
Active Option Writer and Long Term Investor

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. 

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