Trading Long Straddles

My paper trade would be a 1 day QQQ 56P/57C strangle, entered at about 3:30pm EST - 30 minutes before market closed on Thursday June 30, 2011. Prices below are approximate, but the outcome of the trade will not be affected because any discrepancy would be in the pennies.

QQQ 56P/57C strangle
I will update on July 1, 2011 with the results.
 
Forex Forex

I decided against trading the weekly because of the falling premium values in the August Straddles I´m holding. 3 of them and stopped putting on anymore. Based on half a strike in the QQQ Overlapping straddles.

Anyway I put on a weekly straddle yesterday as well. My chosen time was 1.5 hours before the CLOSE on Thursday. Compared to your 30 minutes before the Close. I got .47 cents for the straddle. The opening this Friday morning was .16 cents. I had it in my mind that there was supposed to be an economic report out today? Maybe I was wrong? Thought we would get some volatility. Glad I made it a paper trade though and not in my CASH account. So far. Can hold for an hour or so to see if anything will happen to effect volatility.

The business of the QQQ going up, but the volatility dropping bothers me. I have been racking my brains trying to figure a way to trade it with a STRADDLE/STRANGLE. Started to look up my PAIRS TRADING notes. I believe you could do a VIX PUT in this situation and a QQQ call, since they would be travelling in opposite directions as to trending. Though there might not be enough of a trend to make money. Will give it a try on paper this coming week.
 
Quote from falconview:

Forex Forex

I decided against trading the weekly because of the falling premium values in the August Straddles I´m holding. 3 of them and stopped putting on anymore. Based on half a strike in the QQQ Overlapping straddles.

Anyway I put on a weekly straddle yesterday as well. My chosen time was 1.5 hours before the CLOSE on Thursday. Compared to your 30 minutes before the Close. I got .47 cents for the straddle. The opening this Friday morning was .16 cents. I had it in my mind that there was supposed to be an economic report out today? Maybe I was wrong? Thought we would get some volatility. Glad I made it a paper trade though and not in my CASH account. So far. Can hold for an hour or so to see if anything will happen to effect volatility.

The business of the QQQ going up, but the volatility dropping bothers me. I have been racking my brains trying to figure a way to trade it with a STRADDLE/STRANGLE. Started to look up my PAIRS TRADING notes. I believe you could do a VIX PUT in this situation and a QQQ call, since they would be travelling in opposite directions as to trending. Though there might not be enough of a trend to make money. Will give it a try on paper this coming week.
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"Anyway I put on a weekly straddle yesterday as well. My chosen time was 1.5 hours before the CLOSE on Thursday. Compared to your 30 minutes before the Close. I got .47 cents for the straddle. The opening this Friday morning was .16 cents. "

that is suicidal trading!:eek: :confused:
 
Quote from ForexForex:

My paper trade would be a 1 day QQQ 56P/57C strangle, entered at about 3:30pm EST - 30 minutes before market closed on Thursday June 30, 2011. Prices below are approximate, but the outcome of the trade will not be affected because any discrepancy would be in the pennies.

QQQ 56P/57C strangle
I will update on July 1, 2011 with the results.
More...


QQQ 57 call sold at $0.68
P/L $39.00 = 138% including commissions
 
Forex Forex

I noticed that. I quit about 9:30 and went to do some errands, like fixing the car and buying building materials and stuff. But yes I did notice that yours was a winning trade. So the lesson for me, was to switch from a 1.5 hour before close entry, to a 30 min. or less entry. The trade itself is good though. I was glad to see that. I probably would have quit when the straddle hit .40 cents in premium. Even so, yours was a winner since you got in cheaper than me at .24 cents. My qualms were about the THETA at the end of the day, or during the day on FRIDAY expiration in the WEEKLY. For some reason ( I believe credit spreads experience ) I have a mental cut off by 10 a.m. on Friday. Then the declining premiums in my regular spreads I was carrying, where the effect of volatility was having an effect, made me suspicious of the whole thing.
Now late on Friday, in checking I see the day ended well with a lot of intrinsic value in the CALLS. Not sure how to deal with that on the Friday effect.
BUT my general opinion is to trade that trade every week, with real money. Which I will do starting next week.
The burst of the CALLS also put ALL of my three losing spreads into winniing mode as well. I could have cleaned them all out at varying wins. I think I will see what I have on Monday and do that and start that rolling over business again from scratch.

In trading WEEKLY Credit spreads, I am accustomed to the credit spreads going to zero, around noon on Friday. I think I don´t understand the workings on the premiums re the Friday expiration in a straddle. I try to be out before 10 a.m. or sooner. If I can get that cleared up in my brain, will be able to make that trade with more understanding and confidence.

In the meantime, I´m wondering if there would be a difference in regular 6 - 8 week out STRADDLES if I switched from QQQ to the VIX, which is a down trend, opposite to the upward trend of the QQQ. When dropping volatility is reducing premiums in the long straddles of an uptrend. Would you escape losing premium, if you were trading a downtrend VIX Long Straddle in an otherwise index uptrend? Any of you guys able to do a P and L graph, would appreciate seeing that. It is not in my current skill set.
 
By the way. Another way of trading the Long Straddle/strangle is that I read of some guy years ago, who was making out like a bandit, that when the market started to trend and he was in with a straddle, that he simply DROPPED the losing side and went directional with the trade.

Haven´t tried that yet, but it makes a lot of sense. Anybody else done it that way?
 
Quote from falconview:

Haven´t tried that yet, but it makes a lot of sense. Anybody else done it that way?
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Well, here is a question for you - if you look at S&P across shorter periods, do you think after a big 1-3 day directional move the price is more likely to continue going or bounce back a touch? If you think it's going to continue on it's way, you should drop the losing side of the straddle and ride the winners. On the other hand, if you think it is more likely to bounce back, you probably want to take profits (either by liquidating or covering your delta) on the winning side of the straddle and take an opposite directional view.
 
Quote from eudaemon:

Index options volatility has a pervasive tendency to drop as the market rallies and rise as the market drops. This is one thing working against you. There may be more.
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Well, most of that effect is already baked into the skew and he only cares about the fixed strike reset which is usually fairly small. His main source of pain is theta, lets face it - it is such a waste of time.
 
sle

Interesting comments and views. I didn´t follow your first comment though. Well I did the first half, but not the second half.

As to the second comment, I´m doubting that it is a THETA problem with 6 or more weeks to go on a straddle. Have no way I can view that in a graph as my skill set does not yet lead to that. I do believe it is the dropping IV.

On the other hand, I´m revising how I am trying to work within a one week bar movement. Instead of being a day trader want to be a weekly trader.
 
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