Does straddling work?

Discussion in 'Options' started by jonbig04, Apr 2, 2008.

  1. Can it be profitable to buy a call option and then a put option on the same stock if you anticipate a big move in either direction? lets assume the IV was relatively low on both options.

    if the stock does move a lot in one direction it seems like the gain you would realize on one end would more than make up for the loss on the converse option?
  2. A large directional price move would be good. That type of trade can work well when done a couple of weeks before a company's quarterly earnings announcements. Implied volatility levels get boosted which benefits both sides of the straddle.
  3. Every option strategy works in the right circumstances, otherwise no one would trade it.
  4. Paying a lot of time decay (premium) betting on a big move in a short period of time.

  5. To be honest i didn't know there was an actual term for buying both ends, it was just something i thought was my original idea until i read about straddling haha.

    for example, one could possibly straddle RIMM today?

    RIMMs volatility seems somewhat low considering its earning day and all.
  6. Same old strategies we did in the 70's and 80's, except back then we did them for quarter and half dollars, not pennies, LOL.

    Straddles, strangles, verticals, butterflies, condors, calendar, money, cash spreads, boxes, etc. etc.