4. Buy an option 1-2 strikes out when the price starts nearing one of the short strikes, and roll untested side closer
This defensive strategy is best used, when the original short strangle is opened in such a way, where the strikes are 1-2 strikes above/below technical lines of resistance.
You would initiate this adjustment once the technical resistance level is breached, and becomes support, since this is when you have reason to believe that the price will not correct back. At this time, you BUY an option 1-2 strikes further from the tested side, thereby setting a maximum loss to the tested side of the strangle.
Going long an option will greatly reduce your maximum profit potential, so with this strategy, you also roll the untested side closer, to collect more premium.
For example, let’s say the original short strangle was 1 contract each, opened at 100 -P and 110 -C, and the price of the underlying was 105, with a strong technical resistance level at 109. The price moves up and closes above 109. At this point, you would roll the 100 PUT up a few strikes, but more importantly, buy a Long CALL at 111 to maximize your losses, in case the trend continues.
From here on, you would need to keep an eye on the price of the underlying, since if it turns out to be a failed break-out from the technical level, you would need to close your Long position.