Identifying whether a stock will rise or fall and when that move will happen are not trivial questions. Seasoned professional investors, with reams of data and models, struggle to answer these questions, so a self-directed trader without the same resources may wonder whether they have any means to find an edge. But what if there are investment strategies that don’t require directional judgment? Buy the dips. Sell the rips. Selling a put is an investment strategy in which the seller collects a premium and takes on the risk that they may be compelled to purchase the underlying stock at the strike price, which is generally selected below the prevailing market price. Thus, the put seller is getting paid for the risk of being forced to buy the dip. So, a put seller is taking on a risk similar to buying the underlying stock. Selling a call is an investment strategy whereby the seller collects a premium and takes on the risk that they may be compelled to sell the underlying stock at the strike price, generally selected above the prevailing market price. The call seller is getting paid for the risk of being forced to sell the rip. Remember that investors risk being forced to sell short if they don’t own the underlying shares. A call seller is taking on a risk similar to selling the underlying stock. While buying or selling stocks entails taking risks, it is a risk that every equity investor is taking anyway. So what’s the downside of a strategy that pays you to buy low(er) and sell high(er) then? Can one do both simultaneously? You can, and it’s called selling a strangle. Here are the pros: Unlike purchasing options, where the option buyer needs something to happen within a specific time frame, an option seller profits from time decay. Option premiums decay at a measurable pace, letting you capture profit if the underlying stays relatively range-bound. By selling an OTM call and an OTM put, you collect two premiums, which can add up if volatility falls or stays muted. Here are the cons: Unlimited downside risk: Single stocks can be very volatile. A significant move in either direction can lead to substantial losses, and the risk of a big move is higher when single stocks are more prone to idiosyncratic moves such as earnings surprises. Margin Requirements & Liquidity: You must be comfortable with the margin requirements and the potential for assignment, especially in less liquid stocks. Bottom line: Selling strangles can be profitable when you believe a stock will trade within a specific range and are disciplined about risk management. However, it’s not “good” for everyone—especially if you’re uncomfortable with the possibility of being forced to buy or sell the underlying. How does one select which strikes and expiration to sell? The good news is that the absolute value of an option’s delta approximates the likelihood that an option expires in the money. A 20 delta call or -20 delta put has a 20% probability of expiring in the money/being assigned. Since the objective of a short strangle is to collect the premium without being assigned, and if you’re short, both the probabilities must be added together, it’s best to choose options with a delta of 20 or less. Once one gets below a delta of 10, the options typically don’t have much value, so while the probability of keeping the premiums is high, the yield isn’t. 15-20 is probably a good starting point. As for expiration, a premium seller tries to balance risk and reward. Shorter-dated options decay more rapidly as a percentage of their value, but short-dated options don’t have significant premiums. So, one risks a lot to collect a little. Longer-dated options collect more premiums but decay more slowly. Potential catalysts also play a role, but options that expire between 30-60 days in the future are a suitable starting point. Options that expire more than 90 days away decay more slowly and may capture more than one quarterly earnings release. It is best not to tempt fate too often. How and when should one manage risk if the underlying starts to move? The most obvious instance is if the stock touches or breaches a short strike. Closely reevaluate your views on the underlying stock and any news/information in that instance, and cover short legs that have lost 80% or more of their premium. Most of the money that can be made has been. Selling strangles is a more advanced strategy than buy-writes/covered calls/cash-covered puts because there is a risk on both sides. It can have significantly higher margin requirements than buying a call, a put, or a spread. Still, it can also yield a higher probability of profit and doesn’t require a decisive view of the direction of the underlying stock. If you’re new to options, get comfortable with more straightforward strategies first, but once you’ve familiarized yourself with those, selling both upside and downside, done correctly, can yield attractive risk-adjusted returns. Alphabet has already announced earnings, not particularly well received, but that’s water under the bridge. I think the move lower is a bit overdone and am still bullish, but a strangle seller tends to be more agnostic on direction. I’ve provided an example of a short strangle on the name here . DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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