What are the key factors to consider when selecting strike prices for option strangles in the crypto market?

3 answers

• May 06, 2022 · 3 years ago
  One of the key factors to consider when selecting strike prices for option strangles in the crypto market is the current price volatility. Higher volatility generally leads to higher option premiums, which can affect the choice of strike prices. Traders may opt for higher strike prices in high volatility environments to maximize potential profits, or lower strike prices in low volatility environments to reduce the cost of the strategy. Additionally, traders should also take into account their risk tolerance and investment goals when selecting strike prices. It's important to strike a balance between potential profits and the level of risk one is willing to take.
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• May 06, 2022 · 3 years ago
  Another important factor to consider is the time remaining until the options expire. The longer the time until expiration, the more time there is for the underlying asset's price to move and potentially reach the selected strike prices. Traders may choose strike prices that are closer to the current market price if there is less time remaining until expiration, as there is less time for significant price movements. On the other hand, if there is ample time until expiration, traders may opt for strike prices that are further away from the current market price, allowing for more potential profit if the underlying asset's price makes a significant move.
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• May 06, 2022 · 3 years ago
  When selecting strike prices for option strangles in the crypto market, it can be helpful to consider the historical price movements of the underlying asset. By analyzing past price data, traders can identify support and resistance levels that may influence the choice of strike prices. These levels can act as barriers for the underlying asset's price, potentially impacting the profitability of the strategy. Additionally, traders can also use technical analysis indicators and patterns to assist in selecting strike prices. It's important to note that strike prices should not be solely based on historical data, but should also take into account other factors such as current market conditions and news events.
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