Strategies · Library · Options
§2.32Carry
Covered short straddle
Own the shares, sell a call and also sell a put at the same strike and expiry. Bigger premium than a covered call, but you take on more downside: effectively two shares' worth of fall below the strike.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Options
- Held for
- To expiry
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Bullish to flat: expects the stock to finish near or above the strike and wants maximum premium.
- Entry and exit
- Hold shares, sell one call and one put at the same strike and expiry. Let both expire or roll; close if the stock falls well below the strike.
- Sizing
- 1:1:1 (100 shares, one short call, one short put at the same strike)
How it fails
- Loss up to roughly double the stock's fall below the strike, offset by the credit
- Gain capped at the strike plus the credit
- Breakeven sits well below the entry price
- Put assignment adds to the long position
Data it needs
- options chain with strikes and premiums
- underlying daily price
- dividends and borrow cost
ARCANE has the underlying daily close but no options chains, strikes or implied volatilities
How ARCANE uses it
Matches a Call that a stock holds near or above a level, a premium-rich "stays at or above" view. Paper only.
Builds as a long-only proxy. Holding the underlying approximates the stock leg; both sold options are dropped.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §2.32, p. 30 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.