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I was wondering if strangle strategy works for anyone? I have been fairly successful at spreading. Never really get into combinations. Given today's market condition, has anyone make consistent $ out of long strangles ( buying long out of $ puts and calls )? For that matter, the same strategy using short strangles too.
Look forward to your replies.
Posts: 130 | Registered: Jul 2005
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basically strangle in looking for a bigger move, say XOM calls and puts at 55 60 respectiviely for a big move.
WMT on strike price for both calls and puts.(in the money) thats my take,
someone elses The long option strangle varies only slightly from the straddle, and involves buying a call option and put option, using different strike prices, in the same expiration month. The most common strangle position uses out-of-the-money options, but there are variations called “guts” strategies using in-the-money options. Given the same market conditions at initiation, the strangle (using out-of-the-money options) will have a lower trade cost, but would normally require a larger market movement to be profitable.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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quote:Originally posted by keithsan: you lost me, the puts you or calls you buy are either in the money or out, 340 and 250 are out.
AIG looks interesting for a straddle at 60
I always forget to write down the prices...so i can't figure out if I make bank or not on these straddles. anyways, this was on 60.00.
now its 60.80 and I'll try it from there
SEPT 60 calls at 1.95 and same strike puts at 1.15 (I don't understand how I can make money holding both but my book says i can, will try it on paper) now I just have to remember I put the prices here.
basically a purchase cost of 3.10
[ August 05, 2005, 20:55: Message edited by: keithsan ]
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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okay, AIG popped, I missed the day it popped but if I sold on close at friday, my calls are 2.40 and my puts .10
thats only 2.50 I' lost money, now the calls are down .45 so maybe it was a money maker when it first popped...
still don't understand how one would make money on a straddle even with that 2.00 move. Posts: 9110 | From: boston, ma | Registered: Jan 2004
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now its back at the 3.10, maybe the move wasnt strong enough...will keep watching
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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duh, shoulda known this before i started trading options. anyways.
AIG will have to be above 63.10 at expiration or 56.90 to make any bank on that straddle. It did hit 64 that first day and may have made some money if you were quick. Actually if you sold the calls at 64 that woulda made bank and holding the buys would put you in more money but who woulda known. got till sept.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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keithsan, using straddle/stragle strategy does require a larger move for the basket to become profitable, but I have consitatly made money using this strategy as I tend to buy the wrong side when I evaluate an idea, so buying both sides give me a greater chance at winning. The CBOE website has many examples of how to use both of these strategies and are a little lacking of why to use them, but at least you can see profitability senarios.
Some recent plays I've made, COP Sept 70/65 strangle, in @ 2.50 on 8/12 out the puts @ 4.10 and riding the calls as oil seems to be moving back up now. Left .50 on the table with the puts, but pigs get slottered.
8/18 in MRK Sept 32.5/27.5 strangle @ .80 and looks like I'm .15 profitable as of the close Friday and I do expect MRK to erode to 20-25 before expiration. This one I do not expect to do anything with the calls but let them expire worthless, but bought them on Thursday as who could really tell what the verdict would have been and there was always a chance the stock could have traded up on the news.
Other bets I've made in the past week that still have yet to pan out:
MSFT Oct 27.50/25 @ .70 currently .10 underwater, I see the basically sideways move of softy over the past several months and expect a decent drop then rebound over the next 30-45 days and hope to see profitable trades on both sides.
HPQ Sept 27.50/25 @ .60 currently .10 underwater, was a day late on this one, hemmed and hawed before earnings reported at the 25/22.50 level, and trying to see if I can still squeeze a small profit out of this.
AKAM Sept 15 straddle @ 1.20 currently .15 underwater, bought on a mention on CNBC which usually means a dive to me, but looking at technicals, I see it having equal chance in moving either direction.
I truely do like using strangle/straddle as I don't have a crystal ball, and all the talking heads are usually wrong, but do create nice volitility, and this is a way to lower you risk considerably as long as the underlying issue makes a large enough move.
Posts: 30 | From: SC | Registered: Aug 2005
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sounds good to me, having not played one of my own, i'm following a paper trade of AIG and for it to be profitable it needs to nail the parameters i set forth.
MRK i thought of after the fact, some nice plays there. post'em when they come up, I'm always looking for a good Idea
currently just shorting the q's QQQUM 39 puts
[ August 20, 2005, 22:27: Message edited by: keithsan ]
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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Keith, when you say "shorting the Q's QQQNUM 39 puts", do you mean you long the puts or you sold short ?
Posts: 130 | Registered: Jul 2005
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I bought QQQUM puts at various points, scalped a few but hold a bunch in the green...
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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paper trade again on this straddle, AIG not working out, got this from some site but liked it.
straddle CSCO 17.5 strike .30 calls .25 puts. for price of .55, looks like it has to break 18 or 16 bucks to make any bank.
again, I like the postion of it and the call but haven't seen this type of play make money yet so I'll watch for now.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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Only has to break under 17 or over 18 to be ITM and profitable, and I was actually thinking about it myself as a play but decided against it as the feel I get from it is it has already made a significant move down over the last couple weeks from 20 to 17 1/2 and there is nothing happening in my mind to say this is gonna bounce. I've held CSCO long in one of my kids custodial accounts I bought years ago at 24 on the way down.
Don't get me wrong, it's at a great point to at least paper trade, that costs all of nothing and it gives you more examples of what needs to happen to made these strangles/straddles work.
I've been searching earnings calanders and news for anything that looks like a decent play, but like yourself, I've come up blank and am rather miffed by MRK trading up the last 2 days and that trade turning upside down on me. At least AKAM died a horrible death and gave me good profit today on my straddle.
One question keith, who are you trading with for a brokerage? I myself use etrade and they allow complex option trades now finally so you only pay 1 commission and then the per contract fee, even buying on the ask fpr the 5-10 contracts I buy at the low levels I'm playing at, it is cheaper than the 2 commisions buying at the bid I used to have to deal with at etrade. I was just currious if other brokers are offering similar commissions.
Posts: 30 | From: SC | Registered: Aug 2005
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Oh, I take that back about drawing a blank, put MSO on my radar today, just wanna wait and see the IV premium come down a bit as the floor dealers seems to have juiced the contracts with the surge today, and was pissed there are no 27.50 contracts for Sept or Oct
Posts: 30 | From: SC | Registered: Aug 2005
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I use ameritrade, i havent played these "combos" yet. I've been buying straight puts and calls, haven't even sold puts etc..
If ameritrade allows complex brokerage trades they haven't shown up on my screen, I will be calling to ask in them morning as I had the same question myself today.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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Combo is only consistent way I can make $pay. Hard time making straight calls and puts work. Maybe you guys are better at timing the mkt/stock movement.
Posts: 130 | Registered: Jul 2005
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Most broker screens now allows complex plays even 3-way butterflys. The thing is, even though you can, may not be good enough reason to built all your legs all at once.
Posts: 130 | Registered: Jul 2005
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quote:Originally posted by keithsan: straddle CSCO 17.5 strike .30 calls .25 puts. for price of .55, looks like it has to break 18 or 16 bucks to make any bank.
18.40 today, thats bank.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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wtg keith! Did you straddle it with cash or paper? If you played it with cash, you may want to consider holding the puts as they are probably close to worthless anyway and you may get lucky.
Posts: 30 | From: SC | Registered: Aug 2005
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That was the paper one, first paper one to make bank for me, AIG is still stuck and not looking promising. If I was playing it real I would definately hold the puts for a pull back but maybe hold the calls, seems to be running good.
anyways maybe next time I'll put my money where my mouth is.
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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Papertrades are a great way to learn, I've been playing with forex futures with their demo account for about a week now (www.forex.com) and been averaging $300 a day profit with $2k bank to start, granted you get 200:1 margin, but if you can read a chart, give it a try.
Posts: 30 | From: SC | Registered: Aug 2005
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only papering multi plays strangles, straddles, verticals etc. trying to find a rythym
Posts: 9110 | From: boston, ma | Registered: Jan 2004
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