Problem with inverse strangles is that the only play is with the Theta, at least one side of the trade will be ITM at expiry, maybe both, I don't see the logic here. Better to have a single short position that has a chance of going OTM or a straddle where you half your risk, but an inverse strangle, no, I would only write those in-extremis
Thanks for responding. Let me explain my thinking. I'm short calls, and they are ITM. If Tesla rallies, then they go deeper in the money, making management harder. But by flipping one contract to a comparable put... in case of a rally that put will decrease in value. Delta in the money approaches 1.
The calls then increase in value... but that means calls closer to the put also increase in value. So I then STC the short put and STO a short call, at a higher strike.
I have now successfully converted one of my short calls into a much closer to the money short call. One that is likely higher than my cost basis.
I am trying to figure this out as I go. I haven't been in this position before. I could just BTC the calls and eat $12k in losses, but I have already gotten that down to half the contracts I started with, and every trade has been at a net credit.
I have 6 months of time left to manage the position, and I am hoping to get the strikes into prices I actually like, or maybe even turn it into a short strangle.
That's assuming TSLA bounces around between the strikes. If it takes off to the moon (my fear) then it will outrun the put and it will expire, or be cheap to close. If it crashes really low, then the calls may expire worthless.
This way, any move toward one of the strikes helps me. And if it doesn't move much at all, then I just get that theta trickle. But that would be bad because it doesn't give me much to work with for improving strikes.
Hope this makes sense. Please feel free to tell me if I'm missing something, but if you do, assume I'm a bit dumber than average here... a lot of the posts here seem to assume a lot of shared knowledge.