And she does it without betting where the markets will go. Instead, she takes a mathematical approach to trading by selling way out-of-the-money puts and way out-of-the-money calls —a super wide strangle.
So if you imagine an index trading at for simplicity purposes. What Karen does is she bets that the index will indeed stay between 85 and However, whenever the mathematical probability increases, the amount of money you can make from that bet gets smaller and smaller. Like a lot — in order to execute one of these trades. The numbers might even be more — depending on the trade and the brokerage house.
Her 85 strike put has a 2. Each time she is adjusting a trade — she is making a trade that is 2 standard deviations away in either direction — so it is extremely unlikely that her trade will be wrong.
This differs from how most options beginners are taught to trade. Most options beginners are told to sell a strangle as a single trade. And if it goes bad, then cover the strangle at a loss. But Karen manages it differently. She treats each side separately, individually. She might realize the gains on the call side and re-initiate yet another short call. So by constantly adjusting when needed — she is able to be highly consistent. She is rarely wrong. Instead, we do the next best thing — which is super wide iron condors — which effectively mimic super wide strangles.
But hey, this is as close as you can get to her strategy — without constantly monitoring and adjusting on a daily basis.
We have a bit more of a directional strategy and we use weekly options rather than monthly options — so we generally get results within a week or so.
Example So if you imagine an index trading at for simplicity purposes. For most retail investors, this is not a good idea. This changes the game — as Karen says in the video. So how exactly are we implementing this strategy?
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