 |
Trader13
Registered: Jul 2004
Posts: 179 |
06-16-11 01:11 AM
Quote from traderlux:
can you gives us the bullet points?
thank you
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.
Yet, long straddles are so seductive ... no directional bias, limited risk, unlimited reward. But unfortunately, no positive expectancy.
|
| |
|
Edit/Delete • Quote • Complain |
lindq
Registered: Mar 2002
Posts: 2475 |
06-16-11 01:43 AM
Quote from Trader13:
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed.
As with a number of options strategies, straddles are fine as a tool for special situations.
But as a regular trading strategy, forget it. Death by a thousand cuts. Very, very seldom a payoff that is anywhere near the cost or effort, as the underlying has to scream in order to overcome decay, spreads and costs.
Any time you open a straddle, the house is betting strongly against your success. And the house is not stupid.
|
| |
|
Edit/Delete • Quote • Complain |
traderlux
Registered: Aug 2009
Posts: 620 |
06-16-11 04:41 AM
Quote from Trader13:
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.
Yet, long straddles are so seductive ... no directional bias, limited risk, unlimited reward. But unfortunately, no positive expectancy.
thank you.
|
| |
|
Edit/Delete • Quote • Complain |
falconview
Registered: Jun 2010
Posts: 1465 |
06-16-11 02:09 PM
Wow! I´m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.
I´m all set to re-start my test system again today. Will establish a long straddle.
On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can´t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.
While I appreciate all the talk of volatility suggestions. Indeed, I have started keeping track ( scrap paper notes ) of IV on TOS, for Calls and Puts, to see if there is a lesson there. Something I can absorb from practical. I much prefer graphical presentations of volatility. Rather than numbers. DMI is my favorite. But patterns like pennants and flags. But I notice the trendline channel I was trying this week at the turning points would also represent volatility die down.
And yes the points you make are concerning me. Which is why I am trying to trade hourly charts, in a 5 day time frame. The question is will the THETA be greater than a quickie trend ( and volatility ) occuring?
I am also thinking of a Leap option setup, and wondering how much TIME that would give me to realize sufficient change in index value, to make a profit. I don´t know if a one year Leap option THETA would cover say 2 or 3 months market movement enough to profit. I´ll probably try it, practically AFTER I finish this experiment.
|
| |
|
Edit/Delete • Quote • Complain |
HowardCohodas
Registered: Sep 2010
Posts: 961 |
06-16-11 03:42 PM
Quote from falconview:
Wow! I�m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.
I�m all set to re-start my test system again today. Will establish a long straddle.
On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can�t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.
What are you trying to learn with your trades? If you have a hypothesis to test based on what you have read here and elsewhere, write it down, execute one or more trades with it and document your results. Is there a correlation of results with your hypothesis? Why do you think so?
Your testing seems undirected toward what I guess your goal is, i.e. learn how to develop or choose a trading strategy that fits your personality and skill set.
|
| |
|
Edit/Delete • Quote • Complain |
| Receive
an email whenever a new post is added to this thread by subscribing
to it. |
|
|
|
|
