Trading Long Straddles

Wow! I´m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.

I´m all set to re-start my test system again today. Will establish a long straddle.

On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can´t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.

While I appreciate all the talk of volatility suggestions. Indeed, I have started keeping track ( scrap paper notes ) of IV on TOS, for Calls and Puts, to see if there is a lesson there. Something I can absorb from practical. I much prefer graphical presentations of volatility. Rather than numbers. DMI is my favorite. But patterns like pennants and flags. But I notice the trendline channel I was trying this week at the turning points would also represent volatility die down.

And yes the points you make are concerning me. Which is why I am trying to trade hourly charts, in a 5 day time frame. The question is will the THETA be greater than a quickie trend ( and volatility ) occuring?

I am also thinking of a Leap option setup, and wondering how much TIME that would give me to realize sufficient change in index value, to make a profit. I don´t know if a one year Leap option THETA would cover say 2 or 3 months market movement enough to profit. I´ll probably try it, practically AFTER I finish this experiment.
 
Quote from falconview:

Wow! I�m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.

I�m all set to re-start my test system again today. Will establish a long straddle.

On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can�t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.

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What are you trying to learn with your trades? If you have a hypothesis to test based on what you have read here and elsewhere, write it down, execute one or more trades with it and document your results. Is there a correlation of results with your hypothesis? Why do you think so?

Your testing seems undirected toward what I guess your goal is, i.e. learn how to develop or choose a trading strategy that fits your personality and skill set.
 
Howard

I´m testing a method I had in my notes from 25 years ago. This method trades the Long Straddle and it is not your standard volatility trade. So far, I have no one who has anything to offer other than the standard volatility type advice. I could find nothing about it on the internet. Which might mean it disappeared because it was no good. I shall see in a couple of weeks.
 
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:

OK ..... I just entered a live QQQ 55C/54P straddle trade, this is not a paper trade.
  • QQQ @ $54.36.
  • Buy 1 contract QQQ Jun 2011 55.00 call @ $0.0702.
  • Buy 1 contract QQQ Jun 2011 54.00 put @ $0.2502.
  • Commissions included.
  • Total debt $32.04.
  • Must close position tomorrow, which is the last day of trading for these options.
I would have preferred to enter at about 3:30pm EST, but I'm heading out now and won't be back before market closes.
 
Yikes! What is happening to my Long Straddle position? Explain it please?

From the time I bought the straddle this morning, both the CALL and the PUTS have increased in value if I want to sell them? I have together a profit of .44 cents and hold 2 contracts of each.

Which in this novices calculation comes to 400 x .44 = +$176. If I close it now, I make money less commissions $12. What the heck do I do? I wasn´t planning on this.
 
Quote from falconview:

Howard

I´m testing a method I had in my notes from 25 years ago. This method trades the Long Straddle and it is not your standard volatility trade. So far, I have no one who has anything to offer other than the standard volatility type advice. I could find nothing about it on the internet. Which might mean it disappeared because it was no good. I shall see in a couple of weeks.
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Volatility is the only reason to trade straddles. You mentioned using LEAPS. Pull up a straddle with June expiration and then one with Jan13 expiration and compare the gamma. That is the reason people trade straddles in the nearer expiration. I spent 14 years trying to find that one option trade I could put on like a robot and exceed average market returns. Unfortunately, I couldn't find it. The biggest power you have as a retail trader is that you can pick and choose when to trade. If you only want to trade straddles, do it but make sure the market/ stock is set up to give you the best chance. Look for stocks in a tight trading range and ones that have run up where IV is at a 12 month or greater low. Manage them with the expectation that most will stay in that tight range and will be small losers. When you have ones that move, scalp the gamma to take the small profits and at the end you will hopefully come out positive with a few outsized winners giving you a decent return.
 
Quote from falconview:

Yikes! What is happening to my Long Straddle position? Explain it please?

From the time I bought the straddle this morning, both the CALL and the PUTS have increased in value if I want to sell them? I have together a profit of .44 cents and hold 2 contracts of each.

Which in this novices calculation comes to 400 x .44 = +$176. If I close it now, I make money less commissions $12. What the heck do I do? I wasn´t planning on this.
More...

Either buy/ sell stock to get delta neutral or sell 1/2 the straddle and keep the other 1/2
 
Forexforex

I bought in paper money in TOS 2 contracts in GOOG as a straddle in puts and Calls. Two hours before the close. See what we will see tomorrow? Ordinary August two months out. Ouch! I forgot this is supposed to be in the WEEKLY. Whoops! Let me go back and do it again.
 
Quote from falconview:

Forexforex

I bought in paper money in TOS 2 contracts in GOOG as a straddle in puts and Calls. Two hours before the close. See what we will see tomorrow? Ordinary August two months out. Ouch! I forgot this is supposed to be in the WEEKLY. Whoops! Let me go back and do it again.
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I am sure others have already said this but just to repeat, TOS paper executes trades at fills you will never get in real life. It may not seem like a lot but if you want to keep track, you need to add in the slippage or you will be hurting when it is real money. Best bet is to take the average of the bid and ask and add or subtract 10% of the difference between the two. Ex. bid 1.00 ask 1.50 TOS paper says buy is 1.25 you should calculate it at buying 1.30. Even that is being generous.
 
Forex Forex

Spent 45 mins. trying to get into GOOG at the money. The prices would not load in TOS, nor the order panel. After trying everything, I gave up and went to SPY and took the WEEKLY Long Straddle in that. At the money almost. 127
 
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