Strategies for IRA

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Straddle or Iron Fly?

Strategies for IRA

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

In an IRA, selling a Straddle tends to be very buying power intensive because the position must be cash-secured. When selling a Straddle in an IRA, we must also buy an OTM Call so that the position has defined risk, since theoretically the stock can go up forever and the position can lose an infinite amount of money.

Instead of selling a Straddle, we can sell an Iron FLy. An Iron Fly is a short Straddle along with a long OTM Call and a long OTM Put. Doing so, we will be able to gain a similar exposure to the underlying as a Straddle, but we will be using much less buying power. The downside of using an Iron Fly is that we collect a smaller credit, and have a lower winning percentage, but the Iron Fly also loses a smaller amount on average.

For more information on these strategies including optimal strike selection, tune into the segment!

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