Long Straddle Low IV

Discussion in 'Options' started by K-Pia, May 8, 2016.

  1. K-Pia

    K-Pia

    If I had. I wouldn't have asked.
    Please. Don't force me to teach you life.
     
    #11     May 8, 2016
  2. buy 5 vix in any fashion you can. hahah
     
    #12     May 8, 2016
  3. K-Pia

    K-Pia

    Haha.
     
    #13     May 8, 2016
  4. newwurldmn

    newwurldmn

    You said 20-30. Not < 30. There is a huge difference in those statements.

    But I agree. Kappish. Case closed.
     
    #14     May 8, 2016
  5. samuel11

    samuel11

    Oh please teach me life, i can’t wait! :p
     
    #15     May 8, 2016
  6. K-Pia

    K-Pia

    I've been rude.
    A trader has to take his loss.
    However I said cheap is around 20-30,
    Which is obviously expensive (my excuses),
    But if 20-30 is cheap and 30 is the top therefore,
    Everything under 30 is considered as fine (Cheap).
     
    #16     May 8, 2016
  7. K-Pia

    K-Pia

    Ok, first. Don't bother the master. Thx.
     
    #17     May 8, 2016
  8. samuel11

    samuel11

    Master of ignorance apparently.

    Let me break it down for you: if you had constantly bought straddles on SPX in the last few years, you would not have made money overall. That is a fact.

    So considering that VIX was around 17 on average per your calculation, it definitely means that it was not “cheap” as you pretend. Kappish?
     
    #18     May 8, 2016
  9. K-Pia

    K-Pia

    All right. But it's a very loose statement.
    Not a fact. Effectively, 20-30 ain't cheap.
     
    #19     May 8, 2016
  10. When Volatility is low, option premium tends to be cheaper so Long Straddles and Strangles may seem like a smart play. However, Low Volatility conditions exist when moves are small and the likely hood of a big enough move to make the straddle/strangle payoff are lower. Especially once you realize that the market already has the anticipated move priced into the options. So in order for this strategy to pay off, Volatility needs to be at extreme lows (not just barely low) AND when you anticipate that the volatility will spike and the underlying will move significantly.

    The other way to use straddles is with gamma scalping but this is done with volatile underlyings, which is not the case here.

    EDIT: Depending on the underlying, now may be a good time to consider various calendar/diagonal based spreads.
     
    #20     May 8, 2016
    K-Pia likes this.