Trading Long Straddles
- Thread starter falconview
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Well okay, I´m in a real money live Long Straddle trade this Monday morning.
I´ve been reading through this thead. I was looking for the hint somebody gave me on getting a better price in the QQQ on the Long Straddle. Didn´t find it and since the index had hit my buy number, I went ahead and placed the real money order in my account. I did drop 1 cent off the price quoted on TOS. Made me nervous for quite a while, as the order didn´t show up at the bottom of the screen and I was wondering if I should do it again? However in looking through the accounts section, I saw in there that the order was open and working. Checking Long Straddle spread numbers showed the Straddle had gone up 7 cents so far. Anyway, I came back to my writing and reading on here in Elite Trader and let it go. Figuring if it didn´t get filled it would expire at the end of the day. I also have couple of paper trades going. One in PUTS based on my trend change indicator and one a Long Straddle, also paper trading. Both are making money. Already profitable.
Back a half hour later to my REAL MONEY Long STRADDLE and lo and behold, it has been filled at $3.90 for the spread. Now I sweat and sit nervously during this week to see what happens with it. This will be ONE of my allowed 3 trades in real money in TOS for the week.
I´ve been reading through this thead. I was looking for the hint somebody gave me on getting a better price in the QQQ on the Long Straddle. Didn´t find it and since the index had hit my buy number, I went ahead and placed the real money order in my account. I did drop 1 cent off the price quoted on TOS. Made me nervous for quite a while, as the order didn´t show up at the bottom of the screen and I was wondering if I should do it again? However in looking through the accounts section, I saw in there that the order was open and working. Checking Long Straddle spread numbers showed the Straddle had gone up 7 cents so far. Anyway, I came back to my writing and reading on here in Elite Trader and let it go. Figuring if it didn´t get filled it would expire at the end of the day. I also have couple of paper trades going. One in PUTS based on my trend change indicator and one a Long Straddle, also paper trading. Both are making money. Already profitable.
Back a half hour later to my REAL MONEY Long STRADDLE and lo and behold, it has been filled at $3.90 for the spread. Now I sweat and sit nervously during this week to see what happens with it. This will be ONE of my allowed 3 trades in real money in TOS for the week.
Ive been puzzling over the Long Straddle and how you count it. Can somebody chime in? I feel more than a novice, I feel like a complete fool. I suppose I will figure it out, whenever it shows up in my account in TOS though. Still I would like to know for sure.
I place an order for a Long Straddle. 2 contracts. Thats 200 Calls and 200 Puts. If you make .10 cents say, that would be WHAT? Would that be 400 x .10cents or 200 times .10 cents? Simple thing and I figure it out both ways, but my mind simply cannot settle on what the result should be.
I place an order for a Long Straddle. 2 contracts. Thats 200 Calls and 200 Puts. If you make .10 cents say, that would be WHAT? Would that be 400 x .10cents or 200 times .10 cents? Simple thing and I figure it out both ways, but my mind simply cannot settle on what the result should be.
One options contract controls 100 shares.
each option has a 100 multiplier, I see where you are confused. It would be simpler for you this way; you buy a straddle for $2.00 dollars in options parlance, then you pay $2.00 x 100 or $200,
let 's say the position could be sold for $2.10, you would receive $2.10 x 100 or $210 so your net profit is $10 dollars, (hope I have this right or I will be flamed until the end of time). I think you need to think of the straddle as a debit ( cash outlaid) and one position, I think you are being confused by the legs. Anyway, it would be easier for people to help you if you make it clear what your position is, alot of the better posters don't have time to follow every word and previous post. Here is an example,
I am long 10 spy August 320 straddles. I paid $5.80 for the position. This would allow someone to know or look up the delta of the position, volatility, etc. I think you will get better responses to your questions, good trading!
Atticus is one of the great people on Elite Trader. Never stinting his time to challenge obnoxious posters and help novices. He also makes a LOT of Money by my standards in trading. Though he is way too professional for my level, or lack of expertise. His moves and sophistication too far beyond my grade school level.
Okay I got that I think? It is .10 cents on the SPREAD. The 2 contracts of both PUTS and CALLS would simply be 2 contracts on the SPREAD. Not four contracts in total.
You know I´ve learned some strange things, or maybe not so strange on here with the Long Straddle. The first couple of weeks I was legging into the Long Straddle thinking I could get a better price. So I was really tuned to thinking as a directional trade. When I finally realized the Long Straddle/Strangle was actually a SPREAD, it kind of shocked me. I had traded credit spreads and vertical spreads, but they call them Spreads. I didn´t for some reason think that the long straddle was a spread. Once I got that figured out and realized it, ( took about 2 weeks ) my understanding changed. Sometimes I have relapses and can´t figure out what it does as a spread, as my intuition continues to sporadically think of it as a directional trade.
I´ve had a hard time trying to think of the Long Straddle as a non-directional trade. Not technically but intuitively. I´m getting better at it, and I realize theoretically it doesn´t matter which way it goes, up or down, so long as it moves. Still, I´m still struggling with the concept, versus my more familiarity with the directional biased trades. The relapses are getting fewer.
Then there was the criticism and contempt by some contributors because I didn´t know the GREEKS. So I spent about 2 or 3 weeks recording the GREEKS. They don´t seem to have much information effecting the working of a Long Straddle, so I´ve discarded them again.
Somebody contributed on here, his wish that he knew a heck of a lot more about volatility. There were others insistant that the Long Straddle was a Volatility trade. Which I have since confirmed it is. That said, some of the contributions were more naive than my own with the limits they placed on how to use the Long Straddle with volatility. But VOLATILITY being the core thing with the Long Straddle, I started charting the Implied volatility of the Long Straddle and the ISE daily IV vs the HV. Plus the VIX. At least a couple of times a day. This has been rewarding. I have a RANGE now for IV, which is roughly between 16 and 18 VIX. At least in a bullish trend. Of course in a more mixed market, you kind of go between 18 and 32 in the range for more common action. So I have developed some parameters.
One thing I learned from the volatility studies was the effect of volatility balloons and the collapsing of the volatility balloon as if you stuck a pin in it. The effect being immediately felt in the premium, or spread of a Long Straddle. This has me now more wary and I´m still struggling with the shrinking IV of the last half of a Bull Trend. I used to see this graphically as the bars on a chart just get shorter. It is different to see it numerically. You view it a different way. I got a real lesson, thankfully in paper trading with the end of the previous bull trend, when the index kept going up, but the premiums continued to shrink in the long straddle. I knew about it in directional trading straight calls or puts, which you can beat by using credit spreads if you like the risk reward bad ratio. Still it was very informative to see the premiums or spread shrink while the index went up. I haven´t figured out to how to handle that yet.
My biggest problem has been trying to deal with the limitations placed on me by the day trader rule. As I have three strategies I wish to trade and diversify in. Can´t do it I don´t think and the long straddle earns the least, but is probably the safest, so I´m giving it a try this week in real cash. Probably continue just doing the other two strategies on paper trading, for the day when I can skip the the day trader rule. It isn´t that I don´t have the capital, I am just unwilling to risk it, until I get a working money making system in place.
Anyway, for those of you contributing and helping I do appreciate your interest and help.
Okay I got that I think? It is .10 cents on the SPREAD. The 2 contracts of both PUTS and CALLS would simply be 2 contracts on the SPREAD. Not four contracts in total.
You know I´ve learned some strange things, or maybe not so strange on here with the Long Straddle. The first couple of weeks I was legging into the Long Straddle thinking I could get a better price. So I was really tuned to thinking as a directional trade. When I finally realized the Long Straddle/Strangle was actually a SPREAD, it kind of shocked me. I had traded credit spreads and vertical spreads, but they call them Spreads. I didn´t for some reason think that the long straddle was a spread. Once I got that figured out and realized it, ( took about 2 weeks ) my understanding changed. Sometimes I have relapses and can´t figure out what it does as a spread, as my intuition continues to sporadically think of it as a directional trade.
I´ve had a hard time trying to think of the Long Straddle as a non-directional trade. Not technically but intuitively. I´m getting better at it, and I realize theoretically it doesn´t matter which way it goes, up or down, so long as it moves. Still, I´m still struggling with the concept, versus my more familiarity with the directional biased trades. The relapses are getting fewer.
Then there was the criticism and contempt by some contributors because I didn´t know the GREEKS. So I spent about 2 or 3 weeks recording the GREEKS. They don´t seem to have much information effecting the working of a Long Straddle, so I´ve discarded them again.
Somebody contributed on here, his wish that he knew a heck of a lot more about volatility. There were others insistant that the Long Straddle was a Volatility trade. Which I have since confirmed it is. That said, some of the contributions were more naive than my own with the limits they placed on how to use the Long Straddle with volatility. But VOLATILITY being the core thing with the Long Straddle, I started charting the Implied volatility of the Long Straddle and the ISE daily IV vs the HV. Plus the VIX. At least a couple of times a day. This has been rewarding. I have a RANGE now for IV, which is roughly between 16 and 18 VIX. At least in a bullish trend. Of course in a more mixed market, you kind of go between 18 and 32 in the range for more common action. So I have developed some parameters.
One thing I learned from the volatility studies was the effect of volatility balloons and the collapsing of the volatility balloon as if you stuck a pin in it. The effect being immediately felt in the premium, or spread of a Long Straddle. This has me now more wary and I´m still struggling with the shrinking IV of the last half of a Bull Trend. I used to see this graphically as the bars on a chart just get shorter. It is different to see it numerically. You view it a different way. I got a real lesson, thankfully in paper trading with the end of the previous bull trend, when the index kept going up, but the premiums continued to shrink in the long straddle. I knew about it in directional trading straight calls or puts, which you can beat by using credit spreads if you like the risk reward bad ratio. Still it was very informative to see the premiums or spread shrink while the index went up. I haven´t figured out to how to handle that yet.
My biggest problem has been trying to deal with the limitations placed on me by the day trader rule. As I have three strategies I wish to trade and diversify in. Can´t do it I don´t think and the long straddle earns the least, but is probably the safest, so I´m giving it a try this week in real cash. Probably continue just doing the other two strategies on paper trading, for the day when I can skip the the day trader rule. It isn´t that I don´t have the capital, I am just unwilling to risk it, until I get a working money making system in place.
Anyway, for those of you contributing and helping I do appreciate your interest and help.