From Theory To Practice

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The Better Break-Even?

From Theory To Practice

As we look to monitor the size and manage the risk of our trades, a given strategy’s break-even point is a crucial element. The break-even point effectively marks the spot where if the underlying were at this point at expiration, we would break-even on the trade. This is especially important with undefined-risk trades, where our maximum losses are not necessarily capped. So today, we compare and contrast two of our favorite undefined-risk strategies, the Short Straddle and the Short Strangle, in an effort to learn which one offers a more favorable break-even point.

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