Strategies · Library · Options
§2.33Carry
Covered short strangle
Own the shares, sell a call above the price and also sell a put below it with the same expiry. Earns more than a plain covered call with a cushion before the put is touched.
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 stay between the put and call strikes.
- Entry and exit
- Hold shares, sell an out-of-the-money call and an out-of-the-money put, same expiry. Let both lapse or roll; close if the stock drops toward the put strike.
- Sizing
- 1:1:1 (100 shares, one short call, one short put at a lower strike)
How it fails
- Loss grows with a fall below the put strike, roughly doubled by the put assignment
- Gain capped at the call strike plus total credit
- Wider profit zone than a covered short straddle
- Combined margin and assignment risk
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 stays inside a range above and below the entry price. Paper only.
Builds as a long-only proxy. Holding the underlying approximates the stock leg; the 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, §2.33, p. 30 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.