This is the type of Strategy which Few People Knew. Lets understand Why Short Straddle is best as an Option Seller
1. Reduced volatility: By selling both a call and a put option, an option seller benefits from reduced volatility as they are not exposed to large price movements in either direction.
2. Income generation: A short straddle generates income through the sale of the options, providing a steady stream of income for the option seller.
3. Limited loss potential: The option seller’s potential losses are limited to the premium received for selling the options.
4. Time decay: Over time, the value of the options will decrease, which benefits the option seller.
5. Diversification: The short straddle can provide diversification for an option seller’s portfolio, reducing the overall risk.
6. Reduced market risk: By selling both a call and a put option, an option seller is not exposed to market risk, which can be beneficial for those looking to reduce their exposure to the stock
7. Long-term strategy: A long-term short straddle strategy is ideal for those with a long-term investment outlook, as it allows the option seller to generate income over an extended period.
8. Trading flexibility: The short straddle strategy provides the option seller with flexibility, as they can sell a new straddle as the expiration date of the existing options approaches.
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