Strategy - SELL STRADDLE (details below)

• bullish
• bearish
• neutral
  • expect prices to fluctuate in very narrow range
  • prices might flutuate in a broader range
  • moderately certain that prices will not flutuate much
  • short-term weakness but longer term rally
  • hold stock but expect no movement
• volatile

Strategy Implementation
A call option and a put option are sold with the same strike price a.

Upside Potential
Limied to the two premiums received - will be realised if market at expiry is exactly at the strike price level.

Breakeven Points
The lower point (b) will be the strike minus the value of two premiums received, the upper point (c) will be the strike plus the two premiums received. [If the investor would like to broaden this band, a sell strangle might be interesting].

Downside Risk
Unlimited - should the market fall or rise greatly.

Margin
Always required

Comment
If the market does little then the value of the position will benefit as the short positions gain when the option time value falls.