Long and Short ATM Straddles are Dead Money - But a very accurate indicator of future stock movement

[J_Smith]

That's cool. What software is that?

Update for today courtesy of IB TWS - not the best of charts but have some good ones like these, even if the data can not be extracted into excel for analysis, like any good fukin broker allows.

"Professionals gateway to the financial markets" - ME ARSE - bunch of Gobshites working for them, that is for sure

J_S

 

[nitro]

Ah that is IB TWS. Nice. Thanks.

 

[J_Smith]

Anything that looks like easy money is attractive, like a beautiful woman. And we can even tell ourselves we are winning with her. But there is no such thing, only an idle truce perhaps

Always remember the old saying..

"There is nothing between those legs but a whole heap of trouble"

J_S

 

[nitro]

BTW, for people on this thread. Take a look at those IB TWS charts. It should be obvious that the straddles lose money on up days and does ok on down days. Not surprisingly since straddles are vol plays and up days generally see vol come down.

That suggests a slight modification to the ATM straddle into a zero-beta straddle. But you [probably should] turn it into a strangle. Otherwise, weight the legs.

 

[J_Smith]

Well, as I am short, I obviously want the market to go back down, and, I am looking for SPY to finish on Friday around the 210.50 level as per the OI chart - currently at 213.45.

Will it happen, truth is I haven't a fukin clue, but if it does, I will be one "happy camper"

J_S

 

[J_Smith]

BTW, for people on this thread. Take a look at those IB TWS charts. It should be obvious that the straddles lose money on up days and does ok on down days. Not surprisingly since straddles are vol plays and up days generally see vol come down.

That suggests a slight modification to the ATM straddle into a zero-beta straddle. But you [probably should] turn it into a strangle. Otherwise, weight the legs.

But what about the theta - closer we get to expiry the faster the premium will deteriorate.

J_S

 

[nitro]

But what about the theta - closer we get to expiry the faster the premium will deteriorate.

J_S

This thread tried to start this conversation, but it never went anywhere.

http://www.elitetrader.com/et/index.php?threads/atm-straddle-vs-delta-neutral-straddle.87957/

The problem is that the evolution of the skew as the market moves really punishes put vol vs call vol as they go OTM/ITM.

So you have to consider the skew when putting these things on. The curvature on one end is not the same as the other. This is why you need to know what volga and vanna. Complex options positions you are playing chess, not tick-tac-toe.

 

[sle]

But what about the theta - closer we get to expiry the faster the premium will deteriorate.

J_S

The closer you are to expiry, the steeper the skew

 

[J_Smith]

Just said I would throw this one in - let's see what happens it by Friday?

To buy 10 contracts at close would cost $230 plus comms of bout $5 or so.

J_S

 

[J_Smith]

This thread tried to start this conversation, but it never went anywhere.

http://www.elitetrader.com/et/index.php?threads/atm-straddle-vs-delta-neutral-straddle.87957/

The problem is that the evolution of the skew as the market moves really punishes put vol vs call vol as they go OTM/ITM.

So you have to consider the skew when putting these things on. The curvature on one end is not the same as the other. This is why you need to know what volga and vanna. Complex options positions you are playing chess, not tick-tac-toe.

Do ye option guys look at underlying volume at all, or is really all about volatility and skews?

Started to read up on it a while back, and closed the book faster than I opened it

I find that you are far better off to stick with what you know, forget about all else, and just take the trades, win or lose - if you have half a brain and don't risk a large % of your trading capital on one or two trades, then it just becomes a matter of time - the better you get at timing the better your positive results become.

Do you guys even look at bar charts?

J_S