A straddle collects more credit than a strangle, so can we compensate for the less credit received by the strangle by selling 2 strangles?
We compared the results of selling one ATM strangle to two 1SD strangles. At first, we observe similar profit targets between the straddle and the strangles with the strangles having a higher POP and win rate. However, when digging deeper we found that the capital requirements are much higher on the strangles and the average losses were two times as much than on the straddle.
Bottom line, nothing is free. The higher success rate of two strangles vs one straddle comes at a cost of higher capital requirements and larger average losses.
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