My bad, he said on page 1 he's moving the ATM Straddle on page two he mentions he likes to keep the straddle below ATM to make money on the Put so I assumed he follows with the Call ATM and the Put slightly below the ATM Strike.
No, I sold straddle. Like I said, I own NIO and I earlier sold call at I think 7. The stock shot past it, and I realized I did not want to sell the stocks. So I rolled it up a few weeks, but took a loss. To compensate for the loss, I sold a put at the same strike price as well. Now my intention is that I am somewhat prepared to sell my stock at the higher stock price if the stock continues to be higher. The interesting thing that I noted was that as the stock went higher, I changed my straddle strike price from 11 to 12 to 13, and each time I got a credit (without changing the expiry date of the straddle). Let's say the straddle today costs around 6 dollars. And I keep moving it to keep it close to the current stock price, and with time the cost of the straddle (as we get closer to expiry) goes to say 1 dollar. Then I do make the 5 dollars, minus any debits on moving the strike price (which so far have only been credits). I don't have a firm opinion about the direction of the stock. My main goal initially was to gain some return while I owned the stock, and I was prepared to sell it. However look at the rally I changed my mind and decided to keep it a bit longer, and hence I ended up selling straddle.
My question was not about the underlying in any way. My question was is this a strategy that has been discussed/known. Because I felt based on my limited experience dealing with straddles for 2 weeks, that keeping it close to the stock price seemed manageable and with that I could hope to keep doing it until the straddle price goes down from 6 dollars to 1 or so as we get closer to the expiry.
Can you please elaborate on this? Or point me to some resource that can help me understand this better? Thanks!
What I was also looking for was a straddle cost vs stock price graph for a given time. That is for a fixed stock price as of today, or a given day in the future, what the straddle cost would be for different strike prices. I understand that going deep ITM for call/put would raise the price, so I expect it to be cheapest ~ATM. But I don't think that's exactly true because in my experience when I moved my straddle closer to ATM, I got some credit. My newbie guess for a possible explanation to this is that I am moving in a direction that the market is betting against. That is, when I am moving from lower strike price to higher (but still less than the stock price), and I am still getting credit, the options market is betting more that the stock will go down? If that is correct, what chart/graph/metric would give a better explanation/idea about this? And if that is not correct, well, please help me understand straddle price vs strike price relation! :/
Again, If you are selling options you are benefiting from low price movements because of the time/price change relationship. Premium decays in YOUR favour. The downside of selling options is large price movements where the stock price eats up more money than time gives you.