This strategy consists of two parts: (1) short a call and long the underlying stock, and (2) short a put with sufficient cash to purchase the stock if assigned.
This is a combination of the covered call and cash-secured put strategies. If the stock rises above the call strike at expiration, the investor is most likely assigned on the call, which means selling their stock at the call strike. If the stock falls below the put strike at expiration, the investor is more than likely assigned on the put and obligated to buy more stock at the put strike.
Looking for underlying stock to trade in a narrow range during the life of options.
This strategy is appropriate for a stock considered to be fairly valued. The investor has a long stock position and is willing to sell the stock if it goes higher or buy more of the stock if it goes lower.
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