Trading Long Straddles

traderlux

A J bROWN? Now that is interesting. Is that TOS? Not even sure how you get on to the webinair thingy. He was the guy used the debit spread and the straight bet, in a straddle configuration, if I remember rightly, which nobody I ever met, could make work?
 
falcon,
i was on the aj brown webinar, i thought it was good. i will post some hi-lites as i review my notes. i was also on a john ondercin webinar and i will post some notes from it also.


lux
 
Hi,

I read the first 25 pages and wanted to ask what about long synthetic straddles on mid-term expiry? The goal here is to create a delta neutral portfolio made up futures and options. Say an ATM put has -.5 delta to create a risk free ptf I will buy 1 future (+1 delta) and go long 2 put options (-.5 delta x2) that sums up my position delta to zero. Suppose, both options and future maturities due to dec12. I understand this is a minor volatility play compared to classic straddles (+p+c). Future is to gain/loose, say, 10 usd per point while the option will follow a non linear path. Gamma is shabby and so is theta, hopefully. I should paper trade that before putting real money. I guess a 4-month synthetic is to be closed out 1 month later at the most.

After all, this is the basic idea behind the bsm formula; a risk free ptf needing continuosly re-heding.

PS: instead of 2 puts with -.5 delta, I could use 10 puts with -.1 delta that still makes a neutral position delta, along with the long future.
 
Quote from marameo:

Hi,

I read the first 25 pages and wanted to ask what about long synthetic straddles on mid-term expiry? The goal here is to create a delta neutral portfolio made up futures and options. Say an ATM put has -.5 delta to create a risk free ptf I will buy 1 future (+1 delta) and go long 2 put options (-.5 delta x2) that sums up my position delta to zero. Suppose, both options and future maturities due to dec12. I understand this is a minor volatility play compared to classic straddles (+p+c). Future is to gain/loose, say, 10 usd per point while the option will follow a non linear path. Gamma is shabby and so is theta, hopefully. I should paper trade that before putting real money. I guess a 4-month synthetic is to be closed out 1 month later at the most.

After all, this is the basic idea behind the bsm formula; a risk free ptf needing continuosly re-heding.

PS: instead of 2 puts with -.5 delta, I could use 10 puts with -.1 delta that still makes a neutral position delta, along with the long future.
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Options on futures??? What's the underlying
 
Quote from cdcaveman:

Options on futures??? What's the underlying
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Both options and futures base on equity index (cash market) So for example ftse100 options and ftse100 futures. My goal is to set a delta neutral portfolio made up of options and futures. Following the rule behind a simple binomial tree to price options...
 
Quote from cdcaveman:

I gotta learn the greeks on futures
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That is easy! Delta is always 1 and there is not vega, theta etc...so in a synthethis straddle one leg in not affected by time and volatility
 
Quote from falconview:

Traderlux

I look forward to your essence of those webinairs.
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i posted a few thoughts in my journal, trading in luxury, still want to refine my review.

it was by chance that i caught the john ondercin webinar just before the one from aj.
john said he does not like straddles because of the bid/ask spread you fight going in and out of the trade.
he also said he thinks you should have 3 option strats to use and no more, three should be enough.
he likes collars, credit spreads, and calendar spreads.
he says to pick one, get real good at it, then move on to the next.
he doesnt like debit spreads because time value works against you.

aj did a pretty good webinar on long straddles, started with some option basics and worked up from there.
from what i have seen from other sources also (mainly steady options at seeking alpha) i think straddles are not what i want to trade.
aj mentioned a two day training he has on straddles, so i think these things are more involved than i want deal with.

if you have any questions, ask.

lux
 
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