[Options] Selling Premium in Microsoft
Here's the Play:
I like selling a $MSFT October 310/370 Short Strangle for an approximately $7.75 credit. This means I'll be short equal amounts of the 310 puts and 370 calls and this position has undefined risk therefore we'll be vigilant in managing our risk:
As long as $MSFT stays north of $315 and south of $367, then I'll continue holding this position until my profit target. But any close outside of these levels is my signal that $MSFT wants to expand its range and I'm not interested in holding out hope that it'll mean-revert to bail me out.
Meanwhile, I'll leave a resting good-til-canceled limit order to close this spread down for a $3.85 debit. This would represent a capture of 50% of the premium collected today. This is my best practice for managing profits on short strangles.
Note: If holding naked options makes me uncomfortable, or if my available buying power is limited, I would define my risks by adding long OTM calls and puts in the same expiration series. This would reduce my initial net credit and I'd change my closing order to be half of whatever my net credit for all four legs would be.
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