KRE is a regional bank ETF, after a strong impulsive bull run, it looks like KRE is starting a correction. With a IV rank of 34 is at least decent volatility to try a neutral trade. I sold the 50/56 Strangle (25 delta) and collected $1.33 per contract.
With 64% probability of profit at expiration we need the price to stay between $57.34 and $48.67 which is a little over the expected move of 39 days.
@quql, Sold Call options above the price and Put options below the price. If price stays between both I win in both sides, if it goes past any of the options then I win in one and lose in the other, but eventually my loss would be bigger than my win, since I can only make the amount I sold it for.
In other words its a bet on time passing before price moves above/below my break evens. If we are in a correction, then price will move slower and time will work on my side and give me a chance to get to my target.
Hope that helps.
quql
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@AlexanderGotay, oh I uderstand even last time You expalin me.
but its still like magic for me :)
possibly because, I.m always hunting for impulses.not for corrections