question for stradle traders?

[jjk2]

have you bought a ferrari yet ?

i mean given the volatiliy of our markes, straddles would have worked magically ?

especially for finance and us indices.

 

[forex-forex]

I assume you are talking about long straddles.

Quote from jjk2:

have you bought a ferrari yet ?

i mean given the volatiliy of our markes, straddles would have worked magically ?

especially for finance and us indices.

Not necessarily ......Have you noticed how expensive the options are? I have been following the QQQQ's and a 2% move used to double the ATM options, now about 10% is needed. THERE IS NO FREE LUNCH

 

[jjk2]

Quote from forex-forex:

I assume long straddles.

Not necessarily ......Have you noticed how expensive the options are? I have been following the QQQQ's and a 2% move used to double the ATM options, now about 10% is needed.

THERE IS NO FREE LUNCH

yes. long straddles.

so im guessing that IV will adjust accordingly to make it too expensive to buy just before an important announcement ?

 

[forex-forex]

Quote from jjk2:

yes. long straddles.

so im guessing that IV will adjust accordingly to make it too expensive to buy just before an important announcement ?

That applies even during calm markets.

 

[spindr0]

so im guessing that IV will adjust accordingly to make it too expensive to buy just before an important announcement ?

With straddles, you need to be able to find underlyings that are going to move a lot to compensate for the higher cost or you need to look at strategies where you are taking in some premium to offset the cost of your long premium (spreads).

Anyway you cut, there's rarely any easy money... but if you can't cut it, it's easy for them to take it

 

[jjk2]

so you mean like doing covered calls and covered puts at the same time ?

but i thought writing options were considered a big no no....there is unlimited risks when someone excercises....

but then again, i heard no on really excercises....

 

[newguy05]

Quote from jjk2:

have you bought a ferrari yet ?

i mean given the volatiliy of our markes, straddles would have worked magically ?

especially for finance and us indices.

wtf is a "straddle trader", who trade just straddles...

 

[jjk2]

so if the premiums are too expensive, but you still expect a huge price movement, would it be good to do a long strangle instead ? but this would mean that you are sort of guessing which way the prices would move by a big amount ?

 

[jjk2]

Quote from newguy05:

wtf is a "straddle trader", who trade just straddles...

thats wishful thinking.

 

[MTE]

Quote from jjk2:

so if the premiums are too expensive, but you still expect a huge price movement, would it be good to do a long strangle instead ? but this would mean that you are sort of guessing which way the prices would move by a big amount ?

A straddle is a simple bet that the market is underpricing the move. If the move is more than expected then a long straddle makes money, if not then it doesn't. So just because options are expensive doesn't mean that a straddle cannot be profitable. It's all about expectations (implied volatility) and actual move (realized volatility)