Going inverted is tastytrade's method of a defensive trade. When a short strike gets tested,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. Typically this will help mitigate losses by collecting more premium and controlling .
We look tothis 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!