Selling short straddles is like printing free money convince me I'm wrong

Option_Attack said:
Cool idea, bro. Damnnnn...you could have SLAYED it by selling straddles on GME a few weeks ago. Prems were outasite on that badboy! :rolleyes:

Selling Covered straddles or strangles may be okay, but there are better ways to trade. But if you, for example sold a naked straddle on GME after it doubled in early Jan (why not, it's not likely to double again - right?) you would be working double shifts collecting carts at da Walmart, like the other WSB goofs. :)
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And by the way, what is a "covered" straddle, in the short straddle sense? If I buy 100 shares, and sell a call, that is a covered call, no? Then if I sell short 100 shares and sell a put that is a covered put, no? Well, combine the 100 long and 100 short, and you are back to NO NET SHARES. Just like my original proposal. BOOM you just got taken back to school, JUST LIKE THAT...
 
Overnight said:
Why not try it then?
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I might just do that Overnight. But I want to open a new account so I can easily see how its doing over time without having to back out my other gains and what not. But it is very much on my radar. The question is is it better to do this with indexes or single stocks. I would think single stocks. In other words, I'd think there would be more overall profit to sell 200 contracts on 100 different stock (half calls, half puts) then 200 contracts on the SandP 500, for example. But any thoughts on that?

Thanks!
 
I'm just saying if you have a small probability of complete ruin...it's not a good strategy....if you use your account valve as a stop that's another story....but forced liquidation by your broker isn't a good exit strategy lol
 
Saltynuts said:
And by the way, what is a "covered" straddle, in the short straddle sense? If I buy 100 shares, and sell a call, that is a covered call, no? Then if I sell short 100 shares and sell a put that is a covered put, no? Well, combine the 100 long and 100 short, and you are back to NO NET SHARES. Just like my original proposal. BOOM you just got taken back to school, JUST LIKE THAT...
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ok I am going to Reply just because my brain hurts from stupidity.

Say you have stock at 100 you sell ATM call for 5 and ATM put for 5 - say you do it in 2 accounts so that in one you are also short the stock (covered put) and in the other you are long the stock (covered call) stock goes to 200 on M&A. the stock you are long you give UP at 105 leaving you naked for -95 points on the short side. You get + 5 credit from the put your net loss is -90
 
jbt said:
ok I am going to Reply just because my brain hurts from stupidity.

Say you have stock at 100 you sell ATM call for 5 and ATM put for 5 - say you do it in 2 accounts so that in one you are also short the stock (covered put) and in the other you are long the stock (covered call) stock goes to 200 on M&A. the stock you are long you give UP at 105 leaving you naked for -95 points on the short side. You get + 5 credit from the put your net loss is -90
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I have to study this more thoroughly, but it seems you are literally saying go open two separate accounts (!) and in one go long the stock and in the other short the stock? Even if you go through that process (!) doesn't the price movement in the two positions exactly offset one another (!), so you are better off just not going long/short the stock in the first place?

Be nice, please....

Thank you in advance.
 
cdcaveman said:
I'm just saying if you have a small probability of complete ruin...it's not a good strategy....if you use your account valve as a stop that's another story....but forced liquidation by your broker isn't a good exit strategy lol
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But doesn't any strategy have a non zero possibility (you said "probability", but you used the word "small", generally inconsistent with "probability", so I will go with the correct word, possibility) of complete ruin? Buying the S&P 500 - could go to zero tomorrow - complete ruin! The better question is whether it is a smart position to take, taking into account reward potential, risk potential, etc.
 
Saltynuts said:
Now, of course, if the underlying goes up or down TOO much, it could cut into your profitability (or actually cause a loss). HOWEVER, at the point in which it would become unprofitable (or thereabouts, whatever makes you comfortable), you close out your initial positions and sell new calls and puts closer to the market.
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So you close at possibly huge loss? I have been playing around with selling covered straddles (most commonly referred to covered call plus short put). I find that this strategy is only “worth” doing on high volatility stocks which can really hurt you. So back to playing it small for premium selling.
 
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