So it's best not to use this strategy all the time. Would a good time to use it be around earnings reports for certain stocks? What's the best strategy you like to use for the bulk of your portfolio if long straddles/strangles opportunities don't always present themselves? Thanks
That is precisely why I have been DN trading a couple of straddle positions in real time. I do calendar straddles/strangles for earnings releases and for a long time, I have observed the steady IV increase the weeks before the EA. So I'm hoping to get a trading feel for the idea before combining the two.
From what I've seen, you need an edge with this. You either have to get the direction right before adjusting orr get a bump in IV. Or both. Or just get lucky enought to stumble into a stock that keeps reversing! Since I'm not particularly good at either, I figure that the market should do the heavy lifting for me. Eg., positioning myself before/as pre earnings announcement buying raises IV. Time will tell whether this is a better approach for me. I think that more a function of a biased person being correct. Had you followed the chart and shorted more shares and had COST dropped instead of rising then that shorting would have increased your chances of a profit
Well that is what we spoke of earlier. With COST, IV had dropped noticeably and earnings were coming out in a few weeks. My goal was not to go delta neutral all the way into expiration, just to read the mvoes and stay delta neutral as long as I could. When the stock was moving out of its range I stopp shorting stock naturally and this is an individual choice that takes it away from straight delta neutral trading. If I followed the plan and shorted more shares I still would have made money on the large move but much less. However as I said I decided at one point I wanted a positive delta bias. If the stock crashed after earnings I still would have only seen a limited loss and would have had to cut nad move on. But I had a bias going in for sure. I do nto think you need a bias going in for each position but if earnings catalyst is coming then you can adjust as the stock mvoes and do a reevaluation daily.