I'm trading option straddles. I'll buy the same strike call and the same strike put at the price and the same expiring month. If the market price is at 19.20 I have to buy both a call and put at a strike of 19. The call and the put are not identical since the the market price is not exactly at the strike of 19. I'll put the same amount of money into the call as I do in the put but I'll have some more puts than calls or vice versa. Because of this reason I'm kind of lopsided. How do you perfectly hedge a straddle option position if the market isn't exactly at the options strike price?
How to eliminate loss on an Option Straddle
- Thread starter lasner
- Start date
Hmm. why do you think the market price has to be at the strike for a perfect or full hedge?
I think it's irrelevant, but I could be wrong
It's important to know the DTE when you close them, or is this at expiration?
As asked, just say whether this is happening at expiration, or is there still some DTE till expiration?
It makes a big difference, IMO, b/c at expiration the volatilities don't play any role anymore, as then only the spot of the underlying decides...
It makes a big difference, IMO, b/c at expiration the volatilities don't play any role anymore, as then only the spot of the underlying decides...
Do not assume!