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Dick byrd wrote:
>
> w.murray wrote:
>
> > Has anyone had any experience using option straddles and strangles? -I use strangles on the OEX or high beta
> stocks when the market makes a very rapid one-day move... The OEX premiums have been too high for me lately to trade this
> combo in the OEX.
One alternative to straddles I use is to leg into one side in the
direction of choice and then go delta neutral with an offsetting
underlying trade after a short move in my favor. This gives you a
similar P&L curve to a straddle with half the premiums. Margin is also
low due to the hedge. If your wrong about your hedge you can stop
yourself with the underlying and still have kept it to a price similar
to the original straddle premium but you'll have to do some fancy
trading to pay for decay. This a specially advantagous method for stock
options where bid/ask spreads add substantial costs to trading. I almost
always hold my stock options to expiry and trade the underlying
according to market conditions. Only sell the options when IV goes
through the roof.
Rob:)
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