Delta Neutral Straddle

Discussion in 'Options' started by Beams, May 30, 2012.

  1. Beams

    Beams

    Hi,

    I am half way through reading Natenberg's book - so I apologise if this question seems elementary.

    In regards to a delta neutral straddle, in theory this position would have no bias towards any direction, and theoretically remain around the same value, offsetting gains and losses (ignoring theta).

    I was reading this thread (http://www.elitetrader.com/vb/showthread.php?threadid=87957) and MTE makes a valid point that there's no guarantee that the positions would be symmetrical.

    My question is then, is there any advantages trading a delta neutral straddle over a 1:1 straddle?

    My thoughts are the delta neutral straddle would benefit the most from an increase in volatility, say pre earnings, where both the call and put would increase in volatility and thus value. But in terms of the price, in theory, the delta would offset each other, with minimal gains, and therefore would be better suited for non ratio'ed straddles.