As premium sellers, we derive profit from slight inefficiencies that exist in the market. Three of these inefficiencies are:
- Theoretical win rates of short strangle understate actual win rates
- Stocks have been known to trade consecutive days down less often than the theoretical probability
- There is a slightly better chance of short strangles rebounding to profits after a losing trade rather than it being 50/50
With these inefficiencies in mind, short premium trades have been profitable over the long run.
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