Posts Tagged ‘Straddle’

Apple (AAPL) Options Trade: Intraday Straddle using Weeklys

Get Free Options Trading Tips blog.theoptionstradingcourse.com Apple (AAPL) is a great candidate at the moment for using the option trading strategy of intraday straddles with weekly options (or weeklys). Learn how to analyse a potential straddle trade.

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Stress Test: Long Straddle Options Strategy

questoptions.com In this video we do a worst-case scenario analysis on the long straddle options strategy. Find out what factors cause this volatility based strategy to breakdown.
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Could I become at least a millionaire by age 23 by trading options using a “Straddle” strategy every time?

Question by William M: Could I become at least a millionaire by age 23 by trading options using a “Straddle” strategy every time?
I am 17 now, will be 18 in 2 months, I’ve read about all the different investment vehicles there are to make money. Because I live in the UK, I could trade CFDs (Contracts for Differences), but they don’t float my boat now. I’ve read into options trading, bought books, read blogs and articles on the subject, and I’ve been exploring into the many various strategies you can use to invest with and Straddles catch my eye. Straddles are strategies where in which you purchase a Long Call & Long Put with the same strike price, in which before the option has any value, the price of the stock must go strongly up or down. What I’d like to know is if I started with, say, £500 and tradeed stocks using Straddles every time, but once I made enough money, branched out and diversified my investment just to avoid losing everything, could I in 5 years, from age 18 to age 23, or as an alternative, by age 27 become a millionaire, and is this possible and has anybody ever done it in this short of time?

Best answer:

Answer by Jaminio
Straddles and their out of the money cousins Strangles, only work with high volatility underlyings as you use these strategies when you believe that the underlying will move by a large amount, but you don’t know which way (or you would just take the directional trade). First off, to make any money you need for the underlying to move by more than the premium before you can break even.
The problem with high volatility stocks is that this volatility is price into the option (Vega) and the higher the volatility, the more the option costs.

To be put into perspective, your £500 would buy you two options. Because of high cost of bank balance sheets and high Vega on stocks at the moment the average in the money option is running at around 15% premium. So for you to make any money overall, one leg of the option needs to move by 30% before you even break even.

This is a type of hedging strategy so will never make large amounts of money that you are thinking of, what you should do is study one or two areas of the AIM market and then trade CFD’s.

Being very honest, anyone who becomes a millionaire is very good at what they do. So the chances of you becoming a millionaire in the next 10 years through trading is very, very slim unless you are good at it.

Good luck and happy hunting

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Q&A: Scottrade does not allow spreads or straddle option trading, saying that it is too risky. Why are spreads and

Question by skahhh: Scottrade does not allow spreads or straddle option trading, saying that it is too risky. Why are spreads and
straddles considerred so risky?

Best answer:

Answer by Barry S
by spreads and straddle trading i think that you mean when you take both positions and your gain is a result of size of the increase or decrease of the market. for example if the market does not move and you have got a straddle you can make money.

if this is correct then i think that the reason that they view it as being risky is because if people can gain money through guessing the spread it can alter the way that the market works you might not have people taking opposite positions that is needed for a market to operate well.

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Option Play Book – Short Option Straddle

Learn about options with the Option Play Books from Paul Brittain of www.CommodityTradingSchool.com. Master the 19 primary option trading strategies for trading options on commodity futures contracts.

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How do you unwind from the negative side of a straddle option when I am option trading?

Question by Mark W: How do you unwind from the negative side of a straddle option when I am option trading?
I am trying to learn more about option trading. I know how to use calls and puts and have made money doing this. But I now want to get involved in straddles, spreads and selling options. So if I am using a straddle how do I unwind from the negative side of the straddle when the stock is moving away from that side? How do I use a spread and how do I sell a seccessful option?

Best answer:

Answer by Founder, MastersoEquity.com
You sell the negative side when the underlying stock has settled into one direction.

For more detailed information on how to make properly use of Straddles, please visit http://www.optiontradingpedia.com/free_long_straddle.htm (I wrote that page.

http://www.mastersoequity.com

http://www.optiontradingpedia.com

.

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IRS straddle rule applicability for closed option spread positions with many rollovers.?

Question by pvram68: IRS straddle rule applicability for closed option spread positions with many rollovers.?
I’ve done a bunch of option spreads trades in 2005 and getting to know the tax implications while trying to file returns now.
Do I need to declare completely closed straddle (option spread) positions on Part-II of Form 6781 as per straddle rules? Or is it only required when one is actually have a realized loss but not a realized gain on the other leg of straddle during the year?

If I must use form 6781, does every change in the straddle position make it a new straddle? If that’s the way all rollovers add up as multiple straddles, which can be very complex to track in terms of gains and losses, and wash sales between losses and gains. Is there a simpler way to account just for the net loss or gain during the year without bother about individual transactions and wash sales?

Any help is deeply appreciated.

-Ram
I didn’t declare myself as a trader in 2005 but made a bunch of transactions by the year end. As I also had my full time job, guess I need to stick to the investor status, from what I gathered from various sources. I am aware of the make to market accounting but wouldn’t qualify for it.

The only question actually would be whether a loss sale that is done within 30 days either side of a profit trade on a substantially similar property (stock or related stock option) would be considered a wash sale, even if the second one is closed out within the same year. If that does not become a wash sale, then there is no need to go look for the advantages offered under the straddle rule, to set off some of the otherwise washable losses.

And, I think I found a good answer on www.fairmark.com which I am currently reading to doubly make sure, but it indicates that the wash sale does not apply if the subsequent trade is also closed out within the same year. That’d save me a lot of trouble if so.

Best answer:

Answer by alanback
I haven’t done the research, but I would think you could get out of having to do straddle accounting by choosing to mark all your positions to market. Is this an investment activity, or is it a trade or business?

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Q&A: why isn’t the long straddle the most popular options trading strategy?

Question by net lover: why isn’t the long straddle the most popular options trading strategy?
especially for volatile stocks it seems to be the best.
slight movement will bring you into the money and it doesn’t carry as much risk as the others

Best answer:

Answer by Cosmo Cramer
The long straddle works best when you buy the options while market volatility is low, thus paying much less premium. If the market is already going nuts, you may be very right that it will not be moving sideways, but still not make much profit due to the implied volatility causing expensive premiums. So that means, the best time to enter a long straddle is when volatility is low, but you believe it will be more volatile before your contracts expire. You still have risk that volatility will remain low and the market will move sideways.

Don’t get me wrong. I believe the long straddle is a very good options strategy. I was just pointing out it’s downside. Rather than one best options trading strategy, I think there are good ones better used for certain market conditions.

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Option Play Book – Long Option Straddle

Learn about options with the Option Play Books from Paul Brittain of www.CommodityTradingSchool.com. Master the 19 primary option trading strategies for trading options on commodity futures contracts.