i will second the f2 trade tatic as he laid it out for you to play it out. augen has also offered up ideas on these expiry day trades. you could make it delta neutral, or you could skew it if you have a directional bias. you could also enter fri morning. you could also look at omp to get an idea of how you think your u will move on exp fri. spy, iwm, aapl, nflx, and amzn are also good ones to watch.
Gentlemen I´m overwhelmed by your kindness. I appreciate it. This is so unusual on these forums. I will try the expiry STRADDLE in paper money. As to the reasons for the failures. Yes I know the reasons. Credit spreads rely on making money by compounding. But when the market dips violently, your losses by several reasons, tend to almost wipe you out. I hate to make it over months and then give it back in a couple of days. Howard Cohadas website on credit spreads covers the reasons by other experts, to which I attest. Discarded credit spreads as a result. Gap Trading was very lucrative with 4 months of funny money trading. Made 297% in four months. But when I opened a $10,000 cash account, I won the first trade, but lost the next three, which has put me down 30% of cash account. So now I must put it aside for now, though I know the error. The error was not using a Limit order and using a market order to enter. Precalculating the entry and either getting it, or being skipped over. It was like fishing for tuna. You catch the first one, then every other tuna you catch, all you have is heads on your line and hook, to pull in. The bloody sharks had come running and chomped me up. They simply took my market entry order and left it too last and gave me the high of the day in the opening surge. I´ll go back to it, when I can afford it again, if ever. The way I was doing it was compounding also, so when the sharkes bite, it took all the meat I could afford. I´m not sure what is happening on the straight buy and sell in funny money, but lately I have been unable to make bets on the right side of the market. Betting by using indicators seems not to e a good way. Hence my search for something else. Why the long straddle? Well I knew a guy in South Miami did very well at it. Started his own brokerage, started his own bank and both himself and his wife traded long straddles. I never found out what he was doing, just got titillated by my discount broker at the time over the phone. That was a long time ago and learning option stuff was difficult back then. I was trading stocks successfully, but so slow and small, I got tired of it and quit everything and did something else. Lucked out and now I´m old and wondering if I can figure out something now. I´ve probably got $2,500 left of my stake I´m willing to risk and unlike 25 years ago, there are lots of information and charts available. Stocks are too slow. Options are quicker. I like that. So I find myself doing long straddles in paper money. To see what happens. The same month comment is very well taken. I am using second month options, for what are 5 day moves. Don´t know how this will work out over time yet. Need a few more weeks. I am thinking though perhaps LEAP options might be the right way to trade Long Straddles. Might try it later. I´ve looked them up on the internet, but nobody is writing anything about successful long straddle methods, but there must be one or two out there? All I can pull up is the standard pap on a long straddle, but obviously there are other ways of using them to make money. The method I am trying is a mathematical type way, not much thinking to do. I´ve got it figured to run about a 5 day trade. Doesn´t matter which way the market goes. I like that. Will know by the end of the month I think. Again, I wouild like to thankyou guys for your gracious contributions. I didn´t expect it, having been on a couple of other forums. Like a breath of fresh air.
Swinging in my hammock on my verandah. Beautiful day. Finished up my adjustments for today and only have to occasionaly check the computer. I got to thinking about the contribution by ForexForex for the WEEKLY OPTION trading, using the last two days of maximum TIME DECAY. I traded WEELIES for a long time. Indeed would sell a CREDIT SPREAD on Thursday and close it or let it expire on Friday. Did it for about 8 months, and never ever lost with it. I dropped it because the amount of money at risk was huge, compared to what you would take in by selling the credit spread. TOO RISKY. You did need a bit of directional accuracy. Trouble is, one loss could wipe out your account. So the comment by ForexForex on doing the same with a LONG STRADDLE, betting on a 1.5% move sounds interesting. There is TIME DECAY though, in the last two days of WEEKLY OPTION TRADING. That means 4 trades a month. If you could clear 3%, it would be worthwhile. I have a suspicion you would possible lose to TIME DECAY which would effect both sides of a LONG STRADDLE equally. Overnight Thursday to Friday morning is pretty big in TIME DECAY, but doesn´t hurt to try it in paper money. I´m not sure, but I think you would have to exit by 11 a.m. on Friday expiration in the weeklies. The prices tend to go sideways after that until they expire. I wonder if you could sell the TIME DECAY in a long straddle. Guess that would be a SHORT STRADDLE? That might work better? Don´t know anything about the mechanics of that, but will look it up.
I don't really see the logic in this statement. You have a vol model and if you feel implied vol is cheaper then your expected realization, you buy it. If your model is correct, you keep doing it and eventually you get statistically significant results. Income? As in if you are a seller of vol, it's income? Jeesh... You only really care about the difference between realized vol and implied, thats your "income".
I agree. However I don't like to only buy or only sell vol. If I'm only doing one side, I have to assume my evaluation is off. And in general, I require more "vig" on the buy-side. I prefer to be a net seller.
Okay the logic behind that statement is this. One month is too short because long straddles suffer theta decay. So unless you are expecting a huge jump within a month, don't go into that trade. I go for 60-80 days while entering a straddle. Income as how MARKET MAKERS refer to it. I learned how to trade straddles while working for a MM. MMs group certain positions under certain categories. Straddles fall under "speculative strategies/trades". So according to a MM, straddles are not trades that produce monthly income. I am NOT talking about the definition of the word "income". Gee.
Yes, your theta-gamma decay would be inversly proportional to square root of time to expiry, but so is your gamma. As long as you are delta-hedging frequently enough and your realized vol is higher then your implied, you would be ok. Unless you are making some sort of realized vol statement (e.g. you model tells you that vol cycles in 3months, not in one), there is no difference. I _was_ a market maker at one of the IBs (was running their swaptions book) until a year ago and I have _never_ heard this distinction. You are either long gamma or short gamma (possibly in combination with other greeks) and decision depends on the richness or cheapness of implied vs realized.