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What is a Short Straddle & How to Trade?
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- Опубликовано: 3 фев 2016
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Thx for all your vids really helped me actually understand options better then any book and other vids love hows it's small bits broken down
Love your stuff, Mike, thank you! I just BOUGHT A straddle on AAPL, because the IV Rank was 3%, and I selected a 137 Strike Price. Would love to see a video on when to do either one. I think you have one I’ve seen that is excellent. Outstanding education.
Hello mike ,
Thanks for your explanation, I appreciate your efforts for educating us. I would like to ask how we manage losses if stock goes in one direction ..e.g. if stock moves considerably high or low ..in that case IV will be low but losses in Naked Call/put option might be huge..
finally understand straddles! thanks!
Great vids as always. I'm hoping you could address this Straddle question for a noob.
If I'm bullish on XYZ and all the other market signs are also pointing bullish, wouldn't it be feasible to BUY a CALL on XYZ ATM with let's say, 6 months to expiration and BUY an XYZ PUT with weeks to expiration? My take on this weekly PUT strategy is that even though you anticipate the market to trend upwards, you'll have some cheap premiums for a PUT in case XYZ were to drop. If XYZ were to drop rapidly, you can SELL your CALLS and ride the PUTS down for a profit. On the other hand, If XYZ trends upwards like you anticipated, then you can get rid of those weekly PUTS with little loss because they were so cheap. Am I making sense here? What would be the best way to tweak this strategy as it goes up or down? Thanks!!!
Sure that could work - you're reducing the liability with buying options which is extrinsic value you're paying for in the options in general, but less so with the near term long put so I don't hate it!
Great video! Question: if the strike prices are not exactly at the current price, how far off would be ok to pick a strike? Or should I wait till the price gets closer or one of my stroke prices available?
Typically we choose strikes with the most extrinsic value, so whatever has more extrinsic value is what'd we would go with, unless we had a slight directional assumption where we'd go a few strikes up if we're bullish, or a few strikes down if we're bearish - totally up to you though!
Hi Mike Your videos are great. Why don't you number the videos so we know in what sequence should we be seeing the videos
What is the probability an ITM option would be assigned? Does that increase significantly if you use weeklys for very short time span (few days in front of expiration?
It's impossible to say what the probability is as it's totally random, but I like to think about it from an extrinsic value perspective. The lower the extrinsic value is in an ITM option, the more likely the other party is to exercise it, as they give up extrinsic value when they actually exercise.
So to answer your question, shorter timeframes can have higher risk, because there is not a lot of extrinsic value in shorter timeframe options.
Would using Strangle strategy of a highly volatile stock like Amazon right before earnings be profitable? And I would sell the the calls and puts as soon as market opens next day.
Thanks for sharing this strategy..pls advice is it worth to close the trade on the very next second after the entry with some profit...for eg while we entering the trade on that time itself we are in profit mode mean why don't we close the trade on the second itself...pls clarify me ..
For some people it could be - I like to consider commission costs for doing so. If I'm not making much more than the cost of commissions, I don't personally see a point.
Is not being at or nearest strike price most profit or are the deltas at play to make u wait?
YOU ARE THE KING OF NEW YORK
This is killer. I just bought the book for idiots and it helps lmao. This is great content!
Good info. Thanks
Good explanation
Your side profile kinda looks like the wallstreetbets pic
When a stock falls or reaches the given stock price (116 & 125) Do you have to pay that share x's 100? Because each contract is 100 shares. So for example, 120 to 125 is a five dollar increase difference, would I have to pay 500 dollars? Also if a call or put is reach and I get my profit, would one cancels out by itself or do I have to manually do it?
No - assignment risk is rare, because options have extrinsic value, shares do not. If someone exercises their option, they burn that extrinsic value. Assignment typically happens when expiration is very close, or an option is deep ITM with no extrinsic value.
@@tastyliveshow So no to the loss increase or decrease difference . How about both (call & put( canceling out each other)? It does automatically or I have to do it on my own.
You are awesome! Thanks bro!!
Thanks alot, so helpful
Great music
Is there any way to hedge the risks on the upside & downside i.e., above 128.5$ & below 111.5$, without buying safety calls or puts.
Hedging could be executed with long/short stock, but other than that there aren't many options other than defining risk with long puts/calls.
What happens if u sell different strike prices
Then you have a strangle
do we need enough cash to cover 100 share of put(sell put)
It sounds good in general but you need a large amount of cash to sell puts/calls aka writing options. Just a heads up for those who are not familiar.
No u dont!
So if the price move 10 cents execute it then?
God I wish you would use simple numbers like 100 + - 10. Just so I can follow the math easy.
excellent thanks .... I suppose this can be used in any market?
Yes this strategy can be used in any market that offers options. We prefer very liquid options so we can get a fair price and in/out easily.
thanks tasty
Should I buy back the Out of the money option too?
In what sense? Feel free to shoot us an email at support@tastytrade.com with more detail!
@@tastyliveshow When I sell a short straddle with a strike price of say 100$.
On expiration date the underlying is trading at 98$. Now the short put is ITM and you said in this video I should buy it back.
But what about the short call in this example?
It is out of the money but the underlying can still move a couple of percent upwards and end the day at 101$.
Very helpful now I’m finna get balls Depp in a money pool
What IV is considered high?
Most traders use IV Rank or IV Percentile to determine whether IV is high or low. Here's a segment on this:
www.google.com/url?client=internal-element-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/mike-and-his-whiteboard/episodes/iv-rank-vs-iv-percentile-02-09-2016&sa=U&ved=2ahUKEwiV1b39osXoAhULbs0KHbbXCuIQFjAAegQIABAC&usg=AOvVaw02NT_4dPR9ZsqQQ6R_23DO
Needs real examples before during and after outcome.
Can we use iv percentile?
Certainly - IV Percentile is a similar contextual tool, but it weighs each day equally where IV rank does not.
I don't understand why go though so much hard work when you can simply buy Straddle on the opening bell and sell when you make atleast 2% and do this everyday..
If this were the case, that would be epic! All of our studies show that buying options is a losing strategy in the long run.
tastytrade I am sorry I beg to differ.
I thought the same, why sell when you can just buy a straddle? Would the probability be same unless I am missing something?
capital for buy is high, and backfires if volatility drops(god forbid that happens)
btw i m also big fan of straddle / strangle buy. Now looking for other option strategies to take advantage of volatility with less capital
IMHO it depends on IV rank @ the moment when your'e taking the position. Ultimate rule in trading is: Buy low & Sell high. If IV is high then you're better be selling and visa versa.
thank you
Straddle and strangle are named in reverse.
The seller of a put has an obligation to buy, not a right.
Where’s beef?????
There's tons of ways in options so confusing