Anyone have any long straddle (futures options, specifically) exit strategies? Nominal, or percentage?? Or something else? Thansk!
gamma scalp while you have the straddle on. I usually only buy whenever I think a big move is coming or vol is low. After that move, i am out.
I scalp quite a few indexes and futures w/ option chains. Rule #1, While scalping may be nice and sometimes save your bacon, the principle vehicle of value in the trade is the long straddle. If you are long a straddle, you are long volatility. It is absolutely critical that you are betting neutral/long vega when you enter the position. Take advantage of periods of know increases in volatility such as the month before an earnings report. You may also find some success in trading before large announcements. If you know a drug company is going to announce something substantial in 5 weeks, long a straddle and run the gamma, but don't hold it into the announcement unless you've go a large build-up of profit and you're confident of a large move. I never hold into announcements, and always get out before, because profit not taken, is profit not had. Rule #2, Chill out. If you try 'high frequency trading' over your retail platform, you'll drown in fees and overtrade. Avoid overtrading by making decisions according to your deltas, and not according to where the underlying is or has moved to. Rule #3, Have some recognition about the extent of the move you are expecting from the underlying. Obviously if you're to be scalping gamma, you'll want lots of reversals, however, if all hell is coming loose, you'll be better off to let the trend run. The point of gamma scalping is not HFT or trend following, however your opportunities remain with your propensity to understand the character of the market, macro and micro.