Strategy - SELL STRANGLE (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
Put option is sold with a strike price of a and a call option is sold with the higher strike price b

Upside Potential
Limited to the two premiums received.

Breakeven Point at Expiry
Lower point (c) will be the lower strike minus the two premiums received, the upper point (d) will be the higher strike plus the two premiums recieved.

Downside Risk
Unlimited - should the market fall or rise greatly. [If the investor likes the strategy, but not the downside risk, a long butterfly might be interesting].

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.