How to eliminate loss on an Option Straddle

Discussion in 'Options' started by lasner, Apr 16, 2023.

  1. BKR88

    BKR88

    NOT an options expert so ...

    Example:
    Long 1 Call has Delta 40.
    Long 1 Put has Delta 50.
    Buying 10 shares of the stock will equalize Delta but that will change as price changes and time passes by.
     
    #11     Apr 16, 2023
    Sekiyo likes this.
  2. #12     Apr 16, 2023
    TheDawn and BKR88 like this.
  3. IMHO, I think O.P. realized he was going down a rabbit hole by attempting to equalize directional exposure, when a straddle was really not proper choice for what he wanted. -- I am guessing, of course.
     
    #13     Apr 16, 2023
  4. TheDawn

    TheDawn

    You can't really eliminate losses on straddles but what you can do is reduce it by making better guesses of what the future volatility is going to be and by selling some options to reduce your cost so in case where the volatility is not as big as you predicted, your loss is mitigated somewhat.

    There is no way to buy options with strikes at EXACTLY where the market price is unless the market price happens to fall EXACTLY on the strike although some options strike match very very closely to the underlying's market price. Due to the put/call parity if you spend the same amount of $$ to buy calls and puts you will always end up with more calls than puts or vice versa. What I do is I buy the same quantity of calls and puts and if I happen to spend more $$ on calls or puts, so be it.

    Hope this helps.
     
    #14     Apr 16, 2023
    dorietrading likes this.