Q's Straddle before FOMC

[4re]

Greetings options players,


I have been doing research on a Q's straddle that I would like to put on before the June 28 FOMC meeting. I have been looking at buying the July 38 puts/calls. It looks to me like a 2 point move either direction would be about 60% gain and a 3 point move would be 100% gain. This can and has been done many times in a day or two after these meetings.

Does anybody else do this or have any input on this trade?

Thank You,
4re

 

[IV_Trader]

Quote from 4re:

Greetings options players,


I have been doing research on a Q's straddle that I would like to put on before the June 28 FOMC meeting. I have been looking at buying the July 38 puts/calls. It looks to me like a 2 point move either direction would be about 60% gain and a 3 point move would be 100% gain. This can and has been done many times in a day or two after these meetings.

Does anybody else do this or have any input on this trade?

Thank You,
4re

Only if q's moves down. With flat to upward move vols will collapse and erase gamma gains.
I will go long on straddle/strangle for gamma scalp two days before the meeting and close all 5 minutes before announcement.

 

[4re]

Quote from IV_Trader:

Only if q's moves down. With flat to upward move vols will collapse and erase gamma gains.
I will go long on straddle/strangle for gamma scalp two days before the meeting and close all 5 minutes before announcement.

Thanks for the info. I was hoping somebody would answer that knew greeks better than I do.

 

[riskarb]

A 5% move in the underlying? How likely is that?

 

[MTE]

Quote from riskarb:

A 5% move in the underlying? How likely is that?

I agree, the likelihood of Q's moving 5% either way is next to zero, unless the fed does something "crazy".

 

[4re]

Quote from MTE:

I agree, the likelihood of Q's moving 5% either way is next to zero, unless the fed does something "crazy".

Yeah, probably right. I do think this will be a very important meeting though. But usually when anything can happen nothing will.

 

[kalikahuna]

I would have to join the consensus....Q took a beating already, so I dont think its gonna take a sudden dive down another 2pts and odds are the Fed isnt going to announce that the economy is all good, especially with the sentiment that bernanke is constantly spouting...so I dont see it jumping 2 pts up either....also, Q's IV is inflated right now, so, if anything, the options will lose value more than any underlying movement will affect it, since Q's real volatility is prolly a lot lower than the current IV.

Do people generally have success doing straddles with index funds like Q and OEX, DIA, etc....I would not think so, but I could be wrong.

 

[Eliot Hosewater]

Yesterday I put in an order for a long ATM straddle on the OEX, and a short strangle at +/-5, just to see what happens due to the FOMC meeting. I'm also thinking of using the Turtle strategy of scaling out of the losing sides and scaling in on the winning sides.

All in TOS's PaperMoney of course.

 

[IV_Trader]

Quote from IV_Trader:


I will go long on straddle/strangle for gamma scalp two days before the meeting and close all 5 minutes before announcement.

excellent price action today , hoping for some ramp in vols tomorrow before the meeting.

 

[4re]

Quote from IV_Trader:

excellent price action today , hoping for some ramp in vols tomorrow before the meeting.

I am to. We'll have to see what it brings us.