Okay I am starting to look at Deeper OTM than I would normally consider.
I am trying to understand the reasons why one may be better than the other.
Out of the 2 trades which would you prefer and please state your reasons. Thanks Michael
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Given the two choices, I would choose to sell the 85P/120C. I would be farther away from the money and not as vulnerable to volatility in the underlying. And yes, I would make less but my chances of staying in the trade is higher. I would prefer to sleep better and make a lot less per trade and have a much higher overall winning percentage than taking on too much risk and be up all night worrying about the slightest move in CL.
Personally, I would even go farther out and sell the 80P/125C strangle for even less premium and even lower delta. But that is just me......There is no right or wrong. It depends on what your risk tolerance is. There is nothing wrong with selling the 90P/115C strangle (in my earlier option selling days I probably would have taking that exact trade) provided you have a mental stop loss in mind and you have the discipline to exit when that stop is reached. But trading closer to the money strikes also means having to exit more during times of higher volatility.
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Neither, how can you sleep at night being 11.71 OTM?
You may get lucky and have a couple successful trades, but it's just a matter of time before you get wiped out.
What's wrong with CLZ3135C @ .02 x 50 = $1000
CLZ373P @ .02 x 50 = $1000
Margin = $6864 Comm.= $350
Same DTE. Nearly the same ROI as the CLZ385p & CLZ3120C only I would sleep a lot better.
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Based on the OX calculator: CLZ385P x 10 =$900
CLZ3120C x 10 = $700 Margin = $6072 Comm.= $70
$700+ $900 = $1600 - $70= $1530 /$6072= 25% ROI
CLZ3135C x 50 = $1000
CLZ373P x 50 = $1000 Margin = $6864 comm. = $350
$1000+ $1000 = $2000 -$350 = $1650/6864 = 24% ROI
Note: I have not multiplied the margins to keep it simple.
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