Options Jive

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Short Strategies & Their Defense

Options Jive

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

For this segment of Options Jive, Tom and Tony take a look at some of tastytrade's favorite short strategies and how to defend them. We look to apply our shorting strategies to some of the stocks that have recently exhibited price extremes such as Apple, Caterpillar and Boeing.

Traders who sell premium often keep short deltas to hedge vega risk. When the underlying price falls and implied volatility rises, short deltas help the price of the short options also to rise.

To defend our undefined-risk strategies, such as the Short Call, Short Call Ratio, and Skewed Strangle we:

  • Roll up or down the untested (or add a short put)
  • Roll out in time
  • Go inverted

For defined risk strategies, our defenses are limited to delta-neutralizing the trade when our short call has been breached by adding a Short Put Spread.

Tune in as Tom and Tony break down these defensive tactics in-depth.

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