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Balancing Profit and Tail Risk

Best Practices

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

Short premium trades become more profitable, on average, as they approach expiration due to theta decay; however this comes with the tradeoff of higher P/L tail risk.

We generally balance these risk-reward factors by managing contracts roughly halfway to expiration.

Join Tom and Tony today as they see this in action with 45 DTE 16 Delta SPY strangles.

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