That depends on many factors, such as: when it happens, the change in IV etc. But since the 1200 straddle is currently delta positive, your chances to make money if the stock drops are smaller than if you started with delta neutral position like 1225. This is the whole point of being delta neutral.
SLIGHTLY BULLISH?! Static vol and a trade to 1200 on shares... it's a winner if you bought the 1200-straddle? You know what delta is, right? The thing is +45D.
Here, I'll help you out. The 1200 combo is 37 The ATM is 30 Absent a rise in vol, and the surface is flat, the 1200 straddle is gonna lose something like $7 on a touch of $1200 on shares. Sure, strips will rise a bit on the drop. Ignore vol and ask yourself if the 1250 straddle is non-directional? How hard will that be to earn on if the shares rally to 1250?
It makes no difference, it don't make any difference to me what a man does for a living, you understand. But your business is a little dangerous. I want to congratulate you on your new business and I'm sure you'll do very well and good luck to you. Especially since your interests don't conflict with mine. Thank you.
@destriero you just proved my point. With the stock at 1225: 1. 1225 straddle will make money if the stock moves 1SD. 2. 1200 straddle will lose money if the stock moves down, and make money (more than 1225 straddle) if the stock moves up. 3. 1250 straddle will lose money if the stock moves up, and make money (more than 1225 straddle) if the stock moves down. Here is a real example: Last Thursday GOOGL was at 1264. You could enter ATM 1265 straddle, or 1240 straddle (which was 25 points lower). Yesterday the stock closed at 1232, 1.22 SD move down. 1265 straddle made 40%, while 1240 straddle lost 45%. If the stock move up, both straddles would make money, but 1265 would make more. Btw your original question was about shares dropping 1 sigma. Not dropping to 1200. Two different things. Sorry, I'm done. Have better things to do than talking to a wall.
You stated "your chances to make money if the stock drops are smaller (1200 straddle)." The 1200 straddle loses $7 at the strike. In the time between my first mention of the 1200 straddle to now the delta has increased to 48. You don't have a clue what you're talking about.