What happened? DNA Straddle

Discussion in 'Options' started by shortorlong, Feb 26, 2008.

  1. hattryx

    hattryx

    my mistake on that one.. thx
     
    #11     Feb 26, 2008
  2. That's a useful number to be sure, but another useful number is what size of move you're actually betting on with your position.

    Even with no IV contraction, an up move toward a long straddle loses money before it makes money. You were betting on a couple points or more down, or so far up that it overshot your straddle by a week and a half. So, a pretty significant directional bias.

    If you'd opened a 70 straddle, about the same moneyness (thus about the same price) but with opposite directional bias, that puppy would be worth 9 intrinsic now.
     
    #12     Feb 26, 2008
  3. I guess that all of this means that even with Straddles you need to have a bias towards one direction.
     
    #13     Feb 26, 2008
  4. MTE

    MTE

    No, not necessarily, it just needs to be ATM. In this case, I guess the 70/75 strangle would've worked better.
     
    #14     Feb 26, 2008
  5. donnap

    donnap

    When I used to trade long straddles, I would simply buy more on the weak side (or buy fewer on the strong side:D ) if I wanted neutrality.

    I'm curious as to how your straddle would have fared had you neutralzed it this way. IV contraction vs. a slightly favorable move. My guess is that it would have been near breakeven.
     
    #15     Feb 26, 2008
  6. I did a strangle with an 80 Call and 70 Put.

    Monday at 9:30, Put went down 95% and Call went up 250%
     
    #16     Feb 26, 2008