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RT's
What have I learned from watching the best option traders around? These are real floor traders
Not the magazine guys, who admittedly are somewhat sound in their ideas.
A nice delta neutral trade which might be done now is the following: buy September bean straddles or strangles the volatility on these options has been dropping lately.
You then have a position in which you need movement in the futures or underlying. You do really not
Care whether the movement is up or down so long as it moves. As the futures move the delta on your position
Increases or decreases you then need to buy or sell futures to keep the trade delta neutral. What you are hoping for might be the following scenario: beans tank. You have to buy futures to keep your position neutral.
Well then what might happen ? A drought then as the underlying explodes upward you are getting longer and longer as the position goes up, you then sell out everything for a small fortune.
I have seen this type of thing work many times.
Floor Trader
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