CRWD Short Strangle Could Net $1,045 in a Few Weeks

Crowdstrike (CRWD) is currently showing above average volatility with an IV Percentile of 98% and an IV Rank of 84.61%.

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Today, we're going to look at a short strangle trade due to the high IV percentile, that will profit if CRWD stays between 175 and 230 for the next four weeks.

A short strangle aims to profit from a drop in implied volatility, with the stock staying within an expected range.

When implied volatility is high, the wider the expected range becomes.

The maximum profit for a short strangle is limited to the premium received while the maximum potential loss is unlimited. For this reason, the strategy is not suitable for beginners.

Traders that think CRWD stock might remain stable over the next few weeks could look at a short strangle.

As a reminder, a short strangle is a combination of an out-of-the-money short put and an out-of-the-money short call.

The idea with the trade is to profit from time decay while expecting that the stock will not move too much in either direction.

For CRWD stock, an August 21 put with a strike price of $175 could be sold for around $5.55.

Then the short call, placed at the $230 strike, could be sold for around $4.90

In total, the short strangle will generate around $10.45 per contract or $1,045 of premium.

The profit zone ranges between $164.55 and $240.45. This can be calculated by taking the short strikes and adding or subtracting the premium received.

If price action stabilizes, then short strangles will work well. However, if CRWD stock makes a bigger than expected move, the trade will suffer losses.

Note that CRWD is due to report Q2 earnings on August 26th, so this trade should not have any earnings risk if held to expiration.