SLV Straddled Here

[mikeenday]

I believe good to go now.
in 4 May 40 calls @ 1.42

Quote from shortie:

you go first .

maybe small size?



because eventually it will stop moving like crazy

 

[Strangler]

I sell naked straddles every month on a few index funds but would never consider doing it with SLV.

Selling naked straddles on SLV is NUTS.

Right now a SLV May straddle will get you about 10% for 2.5 weeks. They could give me 25% I still wouldn't touch it.

Given the OP has "rudimentary" knowledge of options all I can say is please turn your straddles into iron condors. And this is coming from a guy who hates ICs.

 

[shortie]

Quote from Strangler:

I sell naked straddles every month on a few index funds but would never consider doing it with SLV.

Selling naked straddles on SLV is NUTS.

Right now a SLV May straddle will get you about 10% for 2.5 weeks. They could give me 25% I still wouldn't touch it.

Given the OP has "rudimentary" knowledge of options all I can say is please turn your straddles into iron condors. And this is coming from a guy who hates ICs.

as i mentioned in my opening post i will be buying wings for protection. at the same time i want to have the wings sufficiently far away so that i don't pay too much for them. therefore, i think about my position as a short straddle but with black swan protection.

 

[spindr0]

Quote from shortie:

SLV implied volatility is ~50 right now. i have very rudimentary knowledge about options, my intuition tells me that to sell SLV volatility now could be easy money. but what's the best way of doing this?

i am thinking of writing straddles at various prices levels as SLV is moving around in the coming months. is May 20 2011 too close?

if i write straddles every 5% move in SLV is this a good strategy (e.g. SLV $40 i write $40 straddle, SLV moves to 42 i write $42 straddle, etc.)?

i will be purchasing Wings to protect myself if SLV decides to really go nuts. but let's focus this thread on straddle construction first assuming that the black swans are taken care of.

Naked straddle(s) is not a good idea for rudimentary option knowledge. You need more than that as well as disciplined money management.

Selling the near month straddle is desireable for capturing the higher rate of time decay but you'll be happier with higher premium from a further month if the UL blasts thru your strike.

If you want to sell volatility, look toward hedged positions. Diagonalize if there's skew b/t near months (or weekly/1st month). Another possibility is to gamma scalp shares against a short option position - but that's probably beyond your pay grade now

The best thing is to model various positions and tweak them until you find one which has an aceptable R/R profile.

 

[spindr0]

Quote from shortie:

as i mentioned in my opening post i will be buying wings for protection. at the same time i want to have the wings sufficiently far away so that i don't pay too much for them. therefore, i think about my position as a short straddle but with black swan protection.

You might consider a short strangle as the core so that you have some buffer.

 

[Strangler]

Quote from shortie:

as i mentioned in my opening post i will be buying wings for protection. at the same time i want to have the wings sufficiently far away so that i don't pay too much for them. therefore, i think about my position as a short straddle but with black swan protection.

Yes that's a good idea as long as you buy the wings at the same time as the you sell the straddle (ie an IC).

If you try to leg into the wings at a later date it could get ugly.

With high straddle premiums I would imagine you could put on an IC and still have enough premium to make it a worthwhile trade.

 

[nfamousyoungest]

If you buy the wings when 'it really goes nuts', the price you pay will be nuts. Not much protection after the fact, except for capping your unrealized loss.

 

[shortie]

Quote from nfamousyoungest:

If you buy the wings when 'it really goes nuts', the price you pay will be nuts. Not much protection after the fact, except for capping your unrealized loss.

no, i will buy them at the same time as selling straddles. trying to figure out how far away to place them.

 

[EliteThink]

Quote from Strangler:

I sell naked straddles every month on a few index funds but would never consider doing it with SLV.

can you please expand? what index, what filters do you use, how long have you done it?

thanks.

 

[newwurldmn]

Quote from shortie:

you go first .

maybe small size?



because eventually it will stop moving like crazy

but you can blow up on the trade before that happens. And that's the likely scenario. Odds are against you that it will be quiet from here on. And 1 6% move will end you.