Straddle Options Strategy: How to Continuously Earn Profits

A straddle options strategy is a classic volatility trading approach that focuses on judging market volatility levels rather than simply betting on price direction. By simultaneously configuring call and put options with the same expiration date and strike price, investors can construct a portfolio to capture gains from implied volatility and actual volatility deviations.

In practical application, the straddle strategy can be used to earn volatility premiums when expecting increased market volatility, or to continuously earn time value through structured combinations when volatility is overestimated and prices enter a consolidation phase, thus achieving relatively stable and sustainable income sources.

Gate Options has launched a new combination strategy order function supporting various options strategies. Users can place one-click orders for multi-leg strategies like straddles, helping them efficiently respond to sideways market judgments and continuously earn premiums.

It also provides an overall strategy profit and loss preview.

Straddle Options Strategy

• A straddle involves buying a call and a put option on the same underlying asset, with the same strike price and expiration date.

• Objective: Profit from significant price swings of the underlying asset, regardless of the direction of movement.

Strategy Features:

Bidirectional profit: If the price rises or falls sharply, one of the bought options will profit, offsetting the loss of the other.

Suitable Scenarios:

• The straddle strategy is typically suitable when expecting the underlying asset to experience significant volatility within a certain period, but uncertain whether it will go up or down. For example, before earnings releases, government announcements, or major events.

Strangle (Wide Cross) Combination

• A strangle is an options strategy suitable for expecting large volatility in the underlying asset but uncertain about the direction of price movement. It is similar to a straddle but involves different strike prices, usually requiring lower premium expenditure.

• The main goal of this strategy is to profit from large price swings of the underlying asset, regardless of direction.

Difference from a Straddle:

• Straddle: Buy call and put options at the same strike price;

• Strangle: Buy call and put options at different strike prices, typically with some distance between strikes, resulting in lower total cost.

Suitable Scenarios:

• The strangle strategy is suitable when expecting significant volatility but unable to determine the direction of the underlying asset’s movement.

  • For example: upcoming earnings reports, policy announcements, major market events.

• The main advantage of this strategy is lower premium cost compared to a straddle, with lower risk but requiring larger price movements to profit.

Short Strangle Strategy

Definition:

• A short strangle involves selling a call and a put option on the same underlying asset, with different strike prices but the same expiration date.

• This strategy is suitable when expecting the market to remain relatively stable, with the underlying price staying within a certain range.

Objective:

• Profit from collecting premiums of two options while risking large price movements.

• If the price remains between the strike prices of the sold options, the seller retains the entire premium income.

Suitable Scenarios:

• The short strangle strategy is suitable when expecting limited market volatility, such as when the market is expected to stay in a sideways range or upcoming events (like earnings releases, economic data) are unlikely to trigger large swings.

• The maximum risk occurs if the underlying price moves significantly beyond the strike prices of the sold options.

Summary:

The short strangle strategy is suitable for scenarios where the market price is expected to stay stable, earning premiums from options, but caution is needed as large price swings can lead to substantial losses.

Executing Short Strangle with Rolling Options Tools

For markets expected to be sideways with limited volatility, the short strangle is a common premium income strategy. To reduce manual operation costs and improve execution stability, Gate offers rolling options tools to help users implement this strategy more efficiently.

Using the rolling options tool, users can preset rules for strike selection (e.g., Delta / Strike), expiration cycles (T+1 / T+2 / T+3), sell quantities, and optional take-profit or stop-loss conditions. The system will automatically sell call and put options each trading cycle and seamlessly roll over to the next period after expiration, enabling continuous execution of the short strangle strategy. The tool also provides clear risk metrics, margin estimates, and strategy path explanations, helping users earn premiums more stably while controlling risk, especially suitable for traders seeking long-term participation in sideways markets and automation of strategies.