Trading Long Straddles

Quote from falconview:

Well it´s December 19th today a Monday. Not only did I NOT make back my losses mid year, I was unable to get back to my original starting capital of $10,000.

Nearly did it, day trading, closing trades before the close. But ran afoul of the EXCHANGES and they say I am not allowed to day trade as a pattern trader, but MUST trade overnight. Though if I raise my gambling balance to $25,000 they will allow me to day trade. I can´t see the difference myself. It being my money and whatever the difference between $10,000 and $25,000 qualification. I don´t get it at all.

Anyway, after they handicapped me, my game went to hell. Too much swing or noise and price changes in multiple day trading. I´ve designed and tried a dozen or more methods, but no luck. This past week, I lost anything I had ahead over the past 5 months and ended up just $21 over my starting balance of 5 months ago. Going to halt trading now for two weeks and resume in January fresh start, with my new year balance at $7208.
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From us premo-sellers to you bag holder longs. we thank you.... Bring in another suitcase of money. Please. Your donations are welcome.
 
Richard

Thanks for the tidbit. I´m afraid to try the EMINI. I have not been able to predict it at all, when exploring the idea. Since my account is almost the lowest it has been since the six months I started, I am being conservative and doing my best to make something back, before I increase my RISK. Right now I´m trying to re-discover my volatility trading method I was using 4 months ago, when the EXCHANGE blocked me from day trading. SINCE CLARIFIED for the NEW YEAR.

But thankyou for the heads up. Will probably revisit the EMINI. I would need to see it on my FREESTOCKCHARTS.com, so I can work some of my own indicators. Or BIG CHARTS. I don´t know enough to trade without some sort of backup indicator technical indicators. Nor do I know how to get the EMINI chart real time on these charting programs with indicators I make myself.
 
Well got myself re-organized and trading again, starting with a value of .73 cents a share, as of January 1st, 2012. End of January the account had grown only 2%. Share value .75 cents. Trades too small, but risk more controlled. Plan to get bigger on my trade bets, but this market moves so little and I´m expecting a pullback in February and right now we seem to be erratically diddling with a top?
Been moving to my summer residence ( down here ) this week, so got out of sorts and carrying a desk top computer around is a bit clumsy and trying to get an internet hookup. Finally got a trade in on Friday. Seem to have found a new trend indicator, while fiddling around also. Will try it out. Hoping to get in some fishing and sailing, though so far it has been raining. Holding a bet over the weekend now though. ( small one )
Still trading the QQQ. Until I start making some money doesn´t seem much sense in changing? I looked at SPY and OEX. The OEX seems to be more or less paralleling the QQQ? Different movements, but clearing commissions and percentage versus market move seem to work out the same, so decided to stick with the QQQ. Been trying paper trading CREDIT SPREADS, but anyway I ran the numbers, the risk to reward ratio, does not seem to match that of direct betting on direction. So guess I will stick with the QQQ direct betting. The paper trading in the OEX worked though the last few weeks on the weeklies. Sort of tempting, but think QQQ betting is better.
 
Guess I'll keep shorting straddles then. It has been profitable lately when combined with proper risk management in form of delta hedging etc.
 
Interesting! SHORTING straddles. I did the buying long straddles bit, but too little money and too slow. Never thought of shorting them. How does that work? I´ll try to look it up on the internet. Never crossed my mind. Care to give me a glimpse at the strategy?

Ray
 
Quote from TskTsk:

Guess I'll keep shorting straddles then. It has been profitable lately when combined with proper risk management in form of delta hedging etc.
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I wonder how delta hedging works with straddles since a delta hedge removes directional risk, but with a short straddle, you lose if the underlying breaks out to EITHER side. So do you go long or short the underlying?
 
Quote from falconview:

Aaaah! Just looked up the short straddles. Selling and unlimited risk are not my cup of tea.
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It's not unlimited risk if you're actively managing the risk through greek adjustments via either selling/buying options and/or underlying.

Quote from Robwynge:

I wonder how delta hedging works with straddles since a delta hedge removes directional risk, but with a short straddle, you lose if the underlying breaks out to EITHER side. So do you go long or short the underlying?
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If you're short a straddle, to delta hedge, you have to go long the underlying if price goes up, and short if it goes down. So buy high sell low, which indeed loses you money. A long straddle is the exact opposite.

Talebs fair alpha measure can help in deciding wheter to sell/buy an option. I use it a lot.
1. Fair alpha = 1/2 x IV^2 x S^2 (S=Spot movement) (IV=Annualized IV)
2. Alpha = Gamma/Theta
3. Alpha < Fair alpha = Long | Alpha > Fair alpha = Short
 
Quote from TskTsk:

If you're short a straddle, to delta hedge, you have to go long the underlying if price goes up, and short if it goes down. So buy high sell low, which indeed loses you money. A long straddle is the exact opposite.

Talebs fair alpha measure can help in deciding wheter to sell/buy an option. I use it a lot.
1. Fair alpha = 1/2 x IV^2 x S^2 (S=Spot movement) (IV=Annualized IV)
2. Alpha = Gamma/Theta
3. Alpha < Fair alpha = Long | Alpha > Fair alpha = Short [/B]
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Ok, so it's dynamic - you keep adjusting to get your delta back to zero. I should have realized that. So is this a short IV trade or are you gamma scalping?
 
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