Leaderboard

You are correct to a point. It can end up being slightly directional, but really directional. Lets assume that at the tail end of november SNDK is trading at $39 (which is the strike that I'm in at. At that point in time, the 39 C is worth 2.20 and the 49 Put is worth 10.05 making the long 12.25, or a profit of .10 for not much gain. Lets assume that in the next 2 weeks, SNDK rallies hard and meets back at the middle at 43 on Dec 14. the 39 C is worth 4.58 and the 49 P is now worth 6.30 for a total of 10.88 or a loss of 10.4%. Assuming you can manage to get and average of 4% per week of the initial outlay (which is conservative, I believe), you would still be up 14% and still have more weeks to continue to sell. So it's not too big of an issue. That being said, I think the original strategy has you roll your long strangle when one of the strikes is passed. At the very least, you will have been able to use the strangle for coverage for free at that point. I think if SNDK came down to 39, I'd go 1 more week and then roll it the next week if it was above 39, but the rules for rolling the longs will still need some refinement I think.