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The Double Plateau Strategy: An In-Depth OverviewThe Double Plateau is a market-neutral options strategy suited for low-volatility, range-bound markets. Its P&L structure creates two "plateaus" where profitability is maximized when the underlying stays within a defined range. Here’s how it works:🧩
Construction:Combines call and put options with carefully selected strikes and expiry dates.
Typically involves selling near-the-money options and buying farther out-of-the-money options for both calls and puts.
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Profit Zones:Two plateaus in the P&L graph represent areas of maximum profitability.
These zones are achieved when the underlying price stays within the breakeven levels.
📈 Market Conditions:Best employed in markets expected to remain range-bound with low implied volatility (IV).
Profits are derived from time decay (theta) and a decrease in IV.
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Advantages:Defined Risk and Reward: Risks are capped at the cost of the hedging options, while rewards come from premium collection.
Time Decay Advantage: Gains are accelerated as expiry nears, provided the underlying stays within the range.
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Risks to Consider:Volatility Shift: A sharp movement in the underlying price or a spike in IV can result in losses.
Early Breach of Range: If the underlying breaks the range early, adjustments might be required.
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Practical Use in 1Cliq:With the “Ready Basket” feature in 1Cliq, users can implement this strategy effortlessly. It simplifies order placement by pre-configuring the required trades, saving time and reducing manual errors. This ensures traders can quickly adapt to market changes and execute the strategy with precision.
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