Does straddling work?

J

jonbig04

Can it be profitable to buy a call option and then a put option on the same stock if you anticipate a big move in either direction? lets assume the IV was relatively low on both options.

if the stock does move a lot in one direction it seems like the gain you would realize on one end would more than make up for the loss on the converse option?
 
A large directional price move would be good. That type of trade can work well when done a couple of weeks before a company's quarterly earnings announcements. Implied volatility levels get boosted which benefits both sides of the straddle.
 
Quote from jonbig04:

Can it be profitable to buy a call option and then a put option on the same stock if you anticipate a big move in either direction? lets assume the IV was relatively low on both options.

if the stock does move a lot in one direction it seems like the gain you would realize on one end would more than make up for the loss on the converse option?
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Every option strategy works in the right circumstances, otherwise no one would trade it.
 
Quote from jonbig04:

Can it be profitable to buy a call option and then a put option on the same stock if you anticipate a big move in either direction? lets assume the IV was relatively low on both options.

if the stock does move a lot in one direction it seems like the gain you would realize on one end would more than make up for the loss on the converse option?
More...

Paying a lot of time decay (premium) betting on a big move in a short period of time.

Don
 
To be honest i didn't know there was an actual term for buying both ends, it was just something i thought was my original idea until i read about straddling haha.

for example, one could possibly straddle RIMM today?

RIMMs volatility seems somewhat low considering its earning day and all.
 
Quote from jonbig04:

To be honest i didn't know there was an actual term for buying both ends, it was just something i thought was my original idea until i read about straddling haha.

for example, one could possibly straddle RIMM today?

RIMMs volatility seems somewhat low considering its earning day and all.
More...

Same old strategies we did in the 70's and 80's, except back then we did them for quarter and half dollars, not pennies, LOL.

Straddles, strangles, verticals, butterflies, condors, calendar, money, cash spreads, boxes, etc. etc.

Don
 
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