In this strategy workshop, Liz and Jenny explain the basics of a Strangle strategy. You'll need 1 out-of-the-money (OTM) put and 1 out-of-the-money call, both of which you're going to sell.
You'll start by looking for a very liquid underlying that has high implied volatility rank (IV rank). Generally, we consider anything with an implied volatility rank of over 50% to be high.
When we trade Strangles we're hoping the implied volatility rank will contract, and the price of the underlying will remain in between our short OTM call and short OTM put strikes.
Strangles can be considered a little riskier, which is why Liz and Jenny aim to sell their short call and put at the 1 standard deviation mark (84% probability of being OTM) to increase their probability of success!