Not a whole to this strategy. I would like to try to catch bounces in the QQQ. When I feel the QQQ's are at a short term support level, I would sell the ATM straddle and take a long position in the QQQ. I would also put a stop on the long QQQ's. They idea would be to catch numerous short term moves in the QQQ's while capturing as much of the short premium as possible. I could also take short postions in the QQQ as well but I would prefer to enter before rallies since I will have a large negative vega position and volatility tends to drop on rallies and go up on selloffs. So I wouldn't enter into the straddle looking for a downmove for that reason.
Eldrige, I dont have the account size to worry about the whole thing being neutral or not. LOL What is really important to me is working the plan. When I do the QQQ trade, I am putting that on for a very specfic reason, and that was to stay delta neutral, control the risk on the gamma and try to collect SOME premium...not all the the premium, just some. On the other hand, for example, I have a position in Russell 2K calls that is very much a directional bias. And that is exactly what I want out of that position. If I was a big market maker in QQQ and SPX options, or whatever, then I would concern myself with the total portfolio being Delata and Gamma whatever. Or, if I was trying the strategy that Mav had suggested, 20-100 credit spread, then I would want to be delta neutral there also. In both those cases, THAT was the orginal strategy to begin with, so we stick with it and mangange the risk accoringly. Best, Mike