I think Cottle looks at synthetics to explain similar positions and risk profiles but I am not sure he would advocate a generality that a synthetic would always perform better than the real or vice versa. as a former market maker I am sure he made a lot of money using synthetics to lock in small price differences with his market maker margins/costs/abilities but those are the only people that can do that.
To be, not to be: http://www.elitetrader.com/et/index.php?threads/jokes-2.93321/page-1367#post-4299423
I've recently started selling straddles right before earnings announcements. Here are my results so far I have a few rules 1) I only sell contracts that expire the same week as the earnings announcements 2) I only sell the front month 3) the implied vol on the front month must be at least 50% greater than the next expiry after it (I want to see skew) 4) enter before market close, sell the next morning 5) as usual, i want a relatively tight bid/ask spread so I can easily get out 6) do these with small percentage of your portfolio/margin, these have unlimited risk
no, holding 1 night only (through the earnings announcement) - sell the straddle before earnings, buy it back the next morning after earnings
MU moved 10% and I still made money. You're selling a vol crush. It'd have to make some pretty big moves to take a big loss, but it can happen. Always remember: "anything can happen." That's why you have to play these small.
With this thread I wanted to focus on BUYERS of straddles. So far I haven't seen anything that says that small retail investors as BUYERS of straddles can be consistently profitable.
Perhaps check page 170: Chapter 8. Don't Just Stand There, Do Something: The Straddle. Chapter 9. Don't Just Do Something, Stand There: The Strangle.
I have been long straddles as a stand-alone position for earnings play, when I thought the move was going to be greater than the cost.