What happened? DNA Straddle

[hattryx]

Quote from commiebat:

The stock moved in favour of the straddle by 1 point. The straddle was worth 3 intrinsic before, 4 intrinsic after.

my mistake on that one.. thx

 

[commiebat]

Quote from shortorlong:

MTE - you said "Based on 32.29%, the market expected about 9% move"

Can anyone explain how this calculation is derived? That would be a very useful piece of information.

That's a useful number to be sure, but another useful number is what size of move you're actually betting on with your position.

Even with no IV contraction, an up move toward a long straddle loses money before it makes money. You were betting on a couple points or more down, or so far up that it overshot your straddle by a week and a half. So, a pretty significant directional bias.

If you'd opened a 70 straddle, about the same moneyness (thus about the same price) but with opposite directional bias, that puppy would be worth 9 intrinsic now.

 

[shortorlong]

I guess that all of this means that even with Straddles you need to have a bias towards one direction.

 

[MTE]

Quote from shortorlong:

I guess that all of this means that even with Straddles you need to have a bias towards one direction.

No, not necessarily, it just needs to be ATM. In this case, I guess the 70/75 strangle would've worked better.

 

[donnap]

Quote from shortorlong:

I guess that all of this means that even with Straddles you need to have a bias towards one direction.

When I used to trade long straddles, I would simply buy more on the weak side (or buy fewer on the strong side ) if I wanted neutrality.

I'm curious as to how your straddle would have fared had you neutralzed it this way. IV contraction vs. a slightly favorable move. My guess is that it would have been near breakeven.

 

[switze22]

I did a strangle with an 80 Call and 70 Put.

Monday at 9:30, Put went down 95% and Call went up 250%