Trading Long Straddles

Quote from option_vixen:

absolutely DISagree that options are good INTRAday vehicles.

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Well first of all- the discussion of the thread currently here is relative to straddles... soooo.... have you ever traded straddles intraday?

As for trading options directionally, I am not opposed to swing trading on the equity via the trading vehicle of overnight option positions... just not my style... however I have a huge list of pros vs cons of why trading the option vs the stock provides significantly more benefits with lower risk, better returns, and significantly less capital outlay at risk.. WITHOUT THE NUANCES OF IV FLUCTUATIONS... but I'm more interested in finding out why you disagree...????
 
Tonight the cost of 1 AAPL straddle is ATM (605) is $2253 + $6 in commish. So you are saying the OP should buy...(selling can't happen in his account because he started with $10K) On Monday AM or whenever the magic ball says to then close it for a profit the same day?? Obviously you would leg out...but what if you are wrong? good money management won't always bail you out.

So AAPL & GOOG and even BIDU are to expensive for a $10K pot.

IBM? with a sub 20 vol its too slow to make any money.

I just have not seen anyone make money consistently trading straddles on a daily basis. If you do then more power to you.

Basically I don't want to HAVE to be at the computer watching my indicators every second to work out of a trade. Its too stressful. If your looking for just a $100 or $200 for each trade then the commish and slippage is usually to much.

So it is just personal preference. The only time I have daytraded options is on the ES if I have made more than 50% on a trade that day I'll cash in. Most of the time I hold for at least a few days. Also I almost always sell the options..very rarely I will buy some OTM...but most of the time its just insurance and usually eat them.
 
Quote from option_vixen:

Tonight the cost of 1 AAPL straddle is ATM (605) is $2253 + $6 in commish. So you are saying the OP should buy...(selling can't happen in his account because he started with $10K) On Monday AM or whenever the magic ball says to then close it for a profit the same day?? Obviously you would leg out...but what if you are wrong? good money management won't always bail you out.

So AAPL & GOOG and even BIDU are to expensive for a $10K pot.

IBM? with a sub 20 vol its too slow to make any money.

I just have not seen anyone make money consistently trading straddles on a daily basis. If you do then more power to you.

Basically I don't want to HAVE to be at the computer watching my indicators every second to work out of a trade. Its too stressful. If your looking for just a $100 or $200 for each trade then the commish and slippage is usually to much.

So it is just personal preference. The only time I have daytraded options is on the ES if I have made more than 50% on a trade that day I'll cash in. Most of the time I hold for at least a few days. Also I almost always sell the options..very rarely I will buy some OTM...but most of the time its just insurance and usually eat them.
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LOL no...not saying anything of the sort!!! You clearly missed a key point in one of my previous posts...I said Thurs/Fri and sometimes Wed...and by context of weeklies I am referencing the front week option...in other words in most cases only 1-2 days left to expiration. Huuuuge difference between that & the premiums involved with 1 week remaining.

You clearly have no idea how these straddles with minimal time to expiration work.

For a better understanding-- look up books by Jeff Augen on the subject of options at expiration.
 
Quote from Riffraffpatrol:

I'm sorry but you are looking in entirely the wrong time frame for straddles. Do yourself a huuuge financially life changing favor and study trading strangles/straddles in high beta/high ATR equities with high volume and tight bid/ask weekly options on Thurs/Fris and sometimes Weds...the returns are phenomenal, the probabilities for success are extremely high, and even much higher if you know how to read a chart and the patterns that help signal a price move outside of 1-2 std deviations.
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Towards the end of the weeklies also has the most time decay though, which is a problem. And if stock has high ATR, that just means higher volatility, which would be priced in via higher IV, no? Not sure if I see any edge here...not that EMH has merit anymore, but just saying. Also transaction cost, B/A spread and etc matters a lot more in intraday trading than larger timeframe...
 
Quote from TskTsk:

Towards the end of the weeklies also has the most time decay though, which is a problem. And if stock has high ATR, that just means higher volatility, which would be priced in via higher IV, no? Not sure if I see any edge here...not that EMH has merit anymore, but just saying.
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Time decay on expiration day in the last 2 hrs of trading presents some challenges-- which is why I avoid it. Again-- you must be familiar with all aspects of how time decay functions intraday. High ATR does NOT mean high IV!

Folks-- until you study the intracacies of what I am talking about, and put in the screen time involved to understand and confirm first hand, it comes as no surprise that u will formulate an uninformed an erroneous view.
 
Quote from Riffraffpatrol:

Time decay on expiration day in the last 2 hrs of trading presents some challenges-- which is why I avoid it. Again-- you must be familiar with all aspects of how time decay functions intraday. High ATR does NOT mean high IV!

Folks-- until you study the intracacies of what I am talking about, and put in the screen time involved to understand and confirm first hand, it comes as no surprise that u will formulate an uninformed an erroneous view.
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With it being said that time decay in last 2 hrs is challenging, it is not without it's opportunities... consider the 610/605 straddle in AAPL at around 2:45 pm-- the cost was around .62....by 3:15 it was $ 1.10. The call side couldve been closed out for $ 1.01... a 65% rtn or so, with free puts to hold for potential reversal... which is exactly what happened-- the last 10 mins of trading saw aapl go near lows-- those puts traded at .50 bid...

Helllo...anyone listening...?
 
Quote from TskTsk:

Towards the end of the weeklies also has the most time decay though, which is a problem. And if stock has high ATR, that just means higher volatility, which would be priced in via higher IV, no? Not sure if I see any edge here...not that EMH has merit anymore, but just saying. Also transaction cost, B/A spread and etc matters a lot more in intraday trading than larger timeframe...
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Btw-- bid ask spreads are not an issue if...once again... u r in the right equities.
 
Quote from Riffraffpatrol:

With it being said that time decay in last 2 hrs is challenging, it is not without it's opportunities... consider the 610/605 straddle in AAPL at around 2:45 pm-- the cost was around .62....by 3:15 it was $ 1.10. The call side couldve been closed out for $ 1.01... a 65% rtn or so, with free puts to hold for potential reversal... which is exactly what happened-- the last 10 mins of trading saw aapl go near lows-- those puts traded at .50 bid...

Helllo...anyone listening...?
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Sorry gettin late-- 610/605 Strangle
 
for the example. In this approach does this mean that you have to focus only on a handful of stocks since you have to be more precise in your timing as opposed having position on 20-30 tickers using longer term positions?
 
My bad, I thought you said last 2 days until expiry, not last 2 hrs until expiry...last 2 hrs probably offer some interesting opportunities.
 
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