I just placed my first option trade. A question about strangling.

Discussion in 'Options' started by PeanutMuncher, May 8, 2006.

  1. Hi,

    Yeah, well I just placed my first option trade (okay just paper trading). A May 105 put buy on Expeditors (EXPD). Cross fingers. lol.

    Anyway, I have a question:

    If one 'strangles' a stock - i.e. buys a put and call on the same stock, would it be normal to buy the same number of contracts or balance the dollar amount of each position?

    Thx for your thoughts.

    By the look of some posts here there'll probably be a bunch of you lamblasting me for a) being a noob, b) phrasing something like a noob, c) doing something like a noob, d) asking questions like a noob and maybe there's an e) - z) too.

    I come from two non-trading forums where there's a lot of positive help to noobs (that's where I'm not a noob) so I hope the not-so-helpful of you will not bother to write. But it'll be interesting if you do. :)
  2. LOL. Despite your disclaimers - you are still bound to get the odd unhelpful comment!

    Ratioing the number of contracts on each leg would be done for specific reasons e.g. to be delta-neutral or to fit a specific volatility/direction forecast.

    If both legs were placed simultaneously as a spread, it would probably be considered "normal" to have the same number of contracts for each leg. Though again, this is dependent on your forecast and desired risk profile.