Option Pit

My understanding is that you presented that trade as delta-neutral ("non-directional"). So maybe it was not your point from the beginning.

Here:

 

lol you never stated ATM. We can quote you.

A week’s 1SD in a day results in a loss of $800. A week’s 1SD lower in a week results in a loss of $3200.

 

1D 1SD ~$11 = loss of $700
1D at neutrality = loss of $860
1W at neutrality = total

 

Here are some quotes from the articles I linked:

"A straddle consists of buying or selling both a call and a put of the same strike. Usually this is done with at-the-money options and therefor is initially a delta neutral strategy as at-the-money calls and puts have around 50 deltas"

"When you trade a long straddle, you think the stock is going to move away, either higher or lower, from its current price. For this reason, long straddles are typically placed on at-the-money strikes."

So yes, by default, straddle is initiated at ATM strikes. If using OTM strikes, it is usually specifically mentioned because it changes the goal of the trade from non directional to directional.


If you look at my article How We Trade Straddle Option Strategy, I explain:

"I would like to start the trade as delta neutral as possible. That usually happens when the stock trades close to the strike. If the stock starts to move from the strike, I will usually roll the trade to stay delta neutral. Rolling simply helps us to stay delta neutral. In case you did not roll and the stock continues moving in the same direction, you can actually have higher gains. But if the stock reverses, you will be in better position if you rolled."


The concept of straddle being non directional by default is so basic that I really don't want to waste any more of my time on it. Twisting my words and misquoting me won't change those most basic facts.

But I guess this is the level of knowledge you get on a free forum like ET. As they say, "you get what you pay for".

 

Usually? Usually you say!? By default?!!!

WTF does your article have to do with... exactly shit?

 

Seriously? Could you demonstrate that you know something about options market that is nobody here (@Robert Morse, myself, @destriero, @JackRab etc) would not know?

 

@Robert Morse is not really a good example. I'm pretty sure he paid a lot to get the level of knowledge he has. And I'm pretty sure he would not dispute the fact that long straddle is by default a non directional strategy. Exactly like strangle, butterfly, iron condor, calendar etc.

Any of those strategies can be modified to use different strikes and become directional, but it is a common knowledge that those strategies have been designed to be non directional.

So yes, there are few exceptions here, but whoever initiates a whole discussion to prove that straddle is not a non directional strategy, either has no idea what he is talking about, or simply wants to discredit me.