Short Straddle Update

Discussion in 'Options' started by jwcapital, Mar 29, 2008.

  1. Since the thread started by Mark_nyc intrigued me, I wanted to make a weekly post of the short straddle I entered on March 20, 2008. I initially placed the following order, using the ES (s&p 500 emini) futures as the underlying: Sold 1 Call APR08 ES 1325 and sold 1 PUT APR 08 ES 1325. The total premium received was 75.25. The total dollar amount was $3,763.00. The initial margin for this trade was $6,500.00 with maintenance margin at $6,000.00. As of the close on March 28, 2008, the total premium was 62.50. The total dollar profit to date is $634.00. The current maintenance margin is $5,629. The ES futures traded as follows: Hi for the week: 1365.50; Lo: 1313.75; Close: 1319. I will continue to update this trade until Expiration Friday.
  2. ?........ you may want to get out before 8:50am (CST) on Tuesday. We'll see.
  3. theta636


    JW - what do you consider to be the advantages and disadvantages of selling a straddle on ES rather than SPY? Another thread mentioned that TOS is going to start handling options on futures in 2 weeks so I'm wondering if there are any substantial benefits to trading ES vs. SPY. Thanks
  4. It is a good idea (I was going to suggest it last week as a response to your post in the other thread, but I was not sure it was appropriate to ask). Some clarification questions if you do not mind:

    1. When you got filled for the straddle, where was exactly ES at?
    2. Does the current premium you posted above correspond to the premimum when ES was at close? If yes, what prices did you use to determine the straddle premium (bid, ask, middle, etc?)
    3. Does your initial margin include the premimum received from sale of straddle? In order words, is it some of your cash + premium? The latter is my understanding, but I wanted to make sure that is also what you meant.

    It would also be helpful if you could post the high and low of the straddle premimum, as well as the high and low of margin requirement. The latter is important as it would determine the true rate of return on margin (particularly if the maintaince margin is hit and covered by the other cash in account). I am assuming that you understand my latter point, but if I am not clear pls let me know.

    Thanks for the good work and for sharing it.
  5. Why? Are you afraid of a huge jump to the upside or downside? Are you concerned about the construction spending report? Or the ISM index? The short straddle, based on posted data, has survived worst situations. Like you said, we will see.
  6. You get better leverage with the ES than the SPY. The margin requirement for the ES trade is lower, even counting portfolio margin. As far as TOS, I like them for stocks and stock options. I loe GlobalFutures for Futures and Futures options.
  8. Good discussion, jwcapital thanks for replying to my pm btw.

    Hope you dont mind i post my trades here too since we are playing the same game almost.

    I wrote an otm april iron condor when es was around 1300. (BUY 1150P,SELL 1200P,SELL 1400C, BUY 1450C). For 15 contracts, the initial/maintenance margin was around 10k, and a net premium of 9.5 per contract.

    Currently the net premium is at 5 per contract, resulting in a ~40%($3300) gain . Unfortunately when the market zapped up the 1350 in 2 days earlier, i paniced and bought 7 more contract of 1385C at 18.5 to make the iron condor delta neutral with an upside bias. So now i am sitting at -$1200 loss currently.

    I still think SP500 will make a run to the upside based on technical and the short term bullish sentiment, the market gapped up to 1359 in just 2 days, followed by 3 down days of smaller consolidation movement all above the 20 MA, which is a sign it's building up for another upward run. Will look to close out the 7 1385C contracts when sp hits 1380 or drops below the 20 MA as a stop loss.

    JW, what's your reasoning for using a short straddle vs an otm strangle/condor? as we are both betting the SP will not move too much by expiration. Is it to keep the position smaller? as you would need to write more contracts if doing a strangle or condor.
  9. markg_ny


    It makes three of us.
    I did short straddle for SPY 132 last Friday but I did not follow to the short straddle plan and I wasted money on protective put and call 139 and 125 (7 from 132 as I mentioned in previous thread since the credit was close to 7) – ended up with iron butterfly.
    1. Since my gut feeling was we were due to a big upward move I did only 1 contract and my fills were worse then appropriate bid/ask of the closing prices.
    2. I got 7.5 for short call and put and paid 2.65 for protective call and put for a credit of 4.85.

    I followed the prices for spy 132 straddle for the last week and the changes were:
    3/28/2008,131.51 (-1.27),3.05,3.3,6.35
    3/27/2008,132.78 (-0.42),3.85,2.9,6.75
    3/26/2008,133.20 (-1.65),4.2,2.8,7
    3/25/2008,134.85 (0.13),5.35,2.29,7.64
    3/24/2008,134.72 (2.64),5.4,2.35,7.75
    3/20/2008,132.08 (2.41),4.1,3.7,7.8

    I followed prices for jwcapital futures trade to see how it compares with my spy trade.
    Today, SPY straddle I sold 7.5 I could by for around 6 (OK gain).
    My iron butterfly I can close for 4.6 today (not much gain).
    It will be interesting to see if there is any possibility of adjustment when things go wrong (of if IV goes down in the future).
    I keep the position till any of my protective options is OTM or the short have time value left in them.

    #10     Apr 1, 2008