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What It Means to Go Inverted

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Going inverted is tastytrade's method of a defensive trade. When a short strike gets tested, we have multiple options: roll up the untested side, roll out in time, or go inverted.

Going inverted simply means having both an in the money call and in the money put as our Strangle. Typically this will help mitigate losses by collecting more premium and controlling delta.

We look to manage this position at 50 to 75% of maximum profit. Max profit is defined by the credit received less the width of the strikes. So, if we had an inverted strangle worth $10, and the width of our strikes is $7, we would look to take profit when the strangle is worth $8 (50-75% of max profit of $10-$7 is around $2).

Tune in as Tom and Tony go into this topic in depth!

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