InvestorQ : Is it a good time to write strangles when the markets are volatile?
Mahil Khan made post

Is it a good time to write strangles when the markets are volatile?

Answer
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Jignesh Gupta answered.
2 years ago


Obviously, that is a hard question to answer but it will largely depend on the range that you seek to cover. The answer lies in the current global economic scenario. Firstly, the worries over China and cheap oil are far from over. The volatility has been subdued but any global news flow is likely to take the volatility much higher. That is what we can benefit through strangles. We do not worry about whether Maruti goes up or down. We purely focus on the assumption that the volatility in Maruti will go up and nothing else.

In normal markets it is very difficult to make money through strangles. You make money on strangles only on two occasions. When you expect that the market is going to turn from a lacklustre market to a volatile market. That is a slightly difficult and risky call to take. Secondly, there are times like the current scenario wherein the volatility has come down sharply but the risk factors remain. In that case, you bet on a spike in volatility, which is a less risky thing to do. That is why strangle strategies are making a lot of sense now.