Everything traders need to know about employing Strangles in DeFi Options.

Learn about the Strangle DeFi Options strategy!

Strangle

A strangle is an options trading strategy where a trader simultaneously buys both a call option and a put option on the same underlying asset with the same expiration date, but with different strike prices. Traders employ strangles when they expect significant price volatility but are uncertain about the direction of the move.

💡What is a Strangle?

How Do Strangles Work?

Strangle Payoff Structure

Considerations for Strangles

Strangle: Key Takeaways

Call and put options: The investor buys both a call option and a put option on the same underlying asset.

Different strike prices: The call option has a higher strike price, and the put option has a lower strike price.

Same expiration date: Both options have the same expiration date.

Volatility play: The strategy is used when the investor expects significant price movement in the underlying asset but is unsure of the direction.

Non-directional: The strategy profits from large price movements in either direction.

Profit potential: Profit is unlimited in the direction of the price movement (upward for the call option, downward for the put option).

Premiums: The investor pays the premiums for both the call and put options.

Break-even points: The strategy becomes profitable when the asset's price moves beyond the break-even points, which are the call strike price plus the total premiums (for the call option) and the put strike price minus the total premiums (for the put option).

Maximum loss: The maximum loss occurs if the asset's price is between the strike prices at expiration. The loss is equal to the total premiums paid for both options.

Time decay: As the options approach their expiration date, time decay (theta) accelerates, eroding the value of the options and potentially reducing the profitability of the strategy. 

Everything traders need to know about the Butterfly Spread in DeFi Options

Learn about the Butterfly Spread strategy in DeFi Options!

Butterfly

A butterfly spread is an options trading strategy that involves buying and selling options on the same underlying asset with the same expiration date but different strike prices. This strategy is employed when traders expect the underlying asset's price to remain within a specific range.

💡What is a Butterfly Spread?

How Do Butterfly Spreads Work?

Payoff Structure of Butterfly Spreads

Considerations for Butterfly Spreads:

Takeaways for the Butterfly Strategy

Combination strategy: A butterfly spread involves buying and selling call options (call butterfly) or put options (put butterfly) with different strike prices.

Three strike prices: The strategy involves options with three different strike prices: one lower (A), one at-the-money (B), and one higher (C).

Four options contracts: The investor buys one option with strike price A, sells two options with strike price B, and buys one option with strike price C (all with the same expiration date).

Neutral outlook: The strategy is used when the investor expects the underlying asset's price to remain near strike price B until the options expire.

Limited risk: Both the maximum profit and maximum loss are limited, making this strategy relatively low risk.

Maximum profit: The maximum profit occurs when the underlying asset's price is equal to strike price B at expiration. The profit is the difference between the strike prices (B-A or C-B) minus the net premium paid.

Maximum loss: The maximum loss is limited to the net premium paid for the options.

Break-even points: The strategy becomes profitable when the asset's price is between the two break-even points, which are strike price A plus the net premium paid and strike price C minus the net premium paid.

Time decay: Time decay (Theta) works in favor of the butterfly spread, as the options sold at strike price B lose value faster than the options bought at strike prices A and C. 

Everything traders need to know about employing a Long Call Condor spread in DeFi Options.

Long Call Condor

A call condor spread is an options trading strategy that involves combining two vertical spreads (a long call spread and a short call spread) on the same underlying asset with the same expiration date but different strike prices. This strategy is employed when traders anticipate the underlying asset's price to remain within a specific range.

💡What is a Long Call Condor Spread?

How do Long Call Condor Spreads Work?

Payoff Structure of a Call Condor Spread

Considerations for Long Call Condor Spreads

Everything traders need to know about employing the Iron Condor spread in DeFi Options.

Learn about the Iron Condor Spread in DeFi Options!

Iron Condor

An iron condor spread is an options trading strategy that involves combining two credit spreads on the same underlying asset with the same expiration date. This strategy is employed when traders anticipate the underlying asset's price to remain within a specific range.

💡What is an Iron Condor Spread?

How Do Iron Condor Spreads Work?

Difference Between Iron Condor and Call Condor

Iron Condor: A credit spread strategy, offering an upfront net premium.

Long Call Condor:  A debit spread strategy, requiring an upfront cost.

Payoff Structure of Iron Condor Spreads

Considerations for Iron Condor Spreads

Test your knowledge of Intermediate DeFi Options Strategies!

Strategy Exam

Exam: Intermediate Options Strategies

Learn about the theory and practical employment of intermediate DeFi options strategies!

Course overview

2. Intermediate DeFi Options Strategies

Strangle

Butterfly

Long Call Condor

Iron Condor

Exam: Intermediate Options Strategies