Trading Long Straddles

Dolemite

Thankyou for the suggestion. I kind of like it. But just got frustrated with my paper money account and closed it and cleared it off. Going to start fresh tomorrow.

I tried to narrow down the working tempo, so it was faster and it turned out to be way faster than I could make sense of. I was getting trades in TOS that didn´t agree with my desktop paper entries. Trying to sort it out got really confusing.
Back to square one tomorrow. I will let the TOS computer cool off and start fresh tomorrow. One of the beauties of dealing with paper money.
At least now I know I cannot work in such narrow time limits.
The long straddles seem to work? Albeit not that lucrative overall was my impression. My attempt to compress it didn´t work though.
 
Quote from ForexForex:

Take a look at GLD: http://finance.yahoo.com/q?s=GLD

  • Weekly options offered.
  • Consider entering 1 day before expiry, buy Thursday sell Friday.
  • Debt will only be about $0.80.
  • You don't pay for any time premium.
  • I believe a small movement of 1.5% or more will do the trick.
  • The trade is over quickly, no spending a few days watching it.
  • Try a paper trade this Thursday to see how it works out.

GOOG and QQQ could be considered also.
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UPDATE:


I recommend a GOOG straddle for Thursday, maybe 510 call and 500 put depending on what GOOG is trading at. It's selling for $4.05, but will be cheaper on Thursday. Expires Friday.

I will post a paper trade about 30 minutes before market closes on Thursday.
 
It is hard to make money with straddles, atm options are typically the most accurately priced in the series. Think of it like this, when you buy a straddle you are saying that the market is incorrectly pricing the size or speed a stock will actually move. Someone is selling what you are buying. Trading one type of trade day in and day out is tough, it is better to learn a variety of strategies and trade what the market is showing you. Spend some time really understanding volatility and base trades off of that.
 
Well I got a chuckle from Dolemites post. I actually understood what he said. So there has been improvement from options 101. Though I´m not sure I´m ready to move to Options 102 trainee though? That sounded a little bit too intricate for me at this time.

Actually I closed down midday and went off to see if my contractor planted some bougainvilla and papaya from my nursery I asked him to. Ended up taking a noon nap in the duplex he is building for us. The cool breeze was wonderful to sleep by.

The LONG STRADDLE method seems to work though. Some things become clear, it is entirely mechanical. You do not need to know, or guess what the market will do. I´ve just deleted all my moving averages and other indicators and will try it from the beginning. I would like the shorter time frame, but it is just too many trades for the remainder of my cash account which is $7200. Of which I will only risk $2200 until I build it back. Plus I certainly would end up violating the day trader rules. I don´t even want to know or care what the market is doing. Other than watching the numbers and making the moves. Will try it again in TOS funny money. Going back to one successful trade per week, I hope. I´m no good at multi-tasking any more at my age. I´m going to have to grit my teeth and just concentrate on this thing and see if two more weeks give me any better insights.
The problem is all the wasted time, waiting for my action numbers to arrive. Few days could pass by. I get bored, and I have all kinds of projects I could be working on. Have a solar panel waiting to be finished constructed. I need an alarm when my action numbers are approached, so I can go do some other things, in the meantime.
I´m not even sure I have the temperament to be a trader, the idea is attractive as my physical abilities are not what they were anymore. I was better at building hotels, houses, sailboats, and homebuilt airplanes.

I found a replacement for indicators this week. So far it is working good. I ran across this on Elite Trader on one of the Forums. Printed it out.
http://www.elitetrader.com/vb//attachment.php?s=&posstid=3181969 Anyway I´m trying it and darned if it doesn´t seem to be better forecasting trend changes, than indicators.

You draw a trend line. Slide the trend line to the top side if you are going UP, or the bottom side if you are going down. Then repeat the trendline so you make a channel. You actually keep adjusting it as you get new pèaks or lows. It forms very short trendline channels. You get the pullbacks for loading up and you get trend changes and sideways actions as well. It has forecasting abilities, whereas in trading the LONG STRADDLES the market action and indicators are not at all accurate most of the time.
 
Quote from traderlux:

can you gives us the bullet points?
thank you
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To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.

Yet, long straddles are so seductive ... no directional bias, limited risk, unlimited reward. But unfortunately, no positive expectancy.
 
Quote from Trader13:

To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed.
More...

As with a number of options strategies, straddles are fine as a tool for special situations.

But as a regular trading strategy, forget it. Death by a thousand cuts. Very, very seldom a payoff that is anywhere near the cost or effort, as the underlying has to scream in order to overcome decay, spreads and costs.

Any time you open a straddle, the house is betting strongly against your success. And the house is not stupid.
 
Try looking for videos dude. I was a basic options guy for a while because I couldn't make the leap to understanding dynamic portfolio risk. How positions behave over time in different conditions. I found it easier to learn that stuff through tutorials that go slow and you can rewind and repeat them over and over, etc I'm no dynamic gamma hedger yet, but I at least have a better understanding of options now.

These videos should get you started. They break down and analyze straddles.

http://www.questoptions.com/video_gallery/Stress-Test-Long-Straddle

http://www.questoptions.com/video_gallery/ST-Short-Straddle-Position
 
Quote from Trader13:

To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.

Yet, long straddles are so seductive ... no directional bias, limited risk, unlimited reward. But unfortunately, no positive expectancy.
More...

thank you.
 
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