Wrangle Long and Short

Discussion in 'Options' started by asdfghj7, Aug 31, 2009.

  1. I've searched a very large selection of option trading books, and trader articles containing entry setups and adjustments for a short and/or long wrangle. Bairds, 'Option Market Making', which is good, is the only one. For those who know, any direction towards a magazine article, website, or trading book, is much appreciated.
     
  2. I doubt that you're going to find much written about it since it's a combination of several strategies.

    I don't think that you need a tutorial on entry setups and adjustments, etc. You model the position and see what the risk graph looks like. You use option strategies that fit your outlook (not the converse) and you tailor the strikes, expirations and ratio(s) to achieve an acceptable risk graph. If subsequent events put a leg in jeopardy, you add or subtract something to shift the risk graph (or close it down).
     
  3. http://www.elitetrader.com/vb/showthread.php?s=&threadid=24449&perpage=40&highlight=wrangle[^\s]*&pagenumber=2
     
  4. FWIW, you can achieve a similar risk graph with fewer legs (commission and slippage) by just ratioing next month's strangle to this month's straddle:

    +2 Oct 95 put
    -1 Sep 100 put
    -1 Sep 100 call
    +2 Oct 105 call

    These tend to have unbalanced P&L areas. If one was neutral, it could be balanced out by adjusting the ratio, eg.

    +10 Oct 95 put
    - 5 Sep 100 put
    - 6 Sep 100 call
    +10 Oct 105 call

    Where these can get interesting is pre-earnings when IV is inflated and you can pick up 15 basis pts or more of skew b/t the two months. 2:1 is an extreme ratio... in the vicinity of 7:5 is more practical. To widen the profit zone in the middle of the W, a near month short strangles should be considered.
     
  5. http://www.optionetics.com/forums/topic.asp?fid=6&id=30237&sort=asc

    "
    4. Buy 20x 7.25 puts and sell 10x 7.75 puts for a 3c credit.
    Buy 20x 8.25 calls and sell 10x 7.75 calls for a 4c credit.
    ...

    the wrangle and the backspread have similar characteristics but obviously the backspread (as half of the wrangle) has a strong bearish bias. the wrangle has similar gamma characteristics to the straddle but is a far safer bet if the stock sits still. you give up some of the powerful gamma of the straddle in exchange for less theta risk. thus you win with the wrangle on big moves up or down or if nothing happens. you lose on a slow trickle toward either of your long strikes."
     
  6. Ugh, what a horrible position! You have a 7 ct credit. On an expiration basis that means you lose money above 7.82 and lose money below 7.68 for a 14 ct profit range which is probably non existent after commissions and exit slippage. Your upside and downside breakevens are 2X the strike difference less the credit received or 6.82 and 8.68 ...

    With such wide breakevens and a 1:2 ratio, a move prior to expiration will make peanuts b/t the breakevens (possibly a loss after slippage) .

    This is what people pay big bucks for from Optionetics?
     
  7. According to the page, I guess the comment was not provided by the Optionetics offficially.

    Most likely, that was only a conversation discussed merely by a general poster, who is just like you and me on ET, posting misleading information would be quite common.
     
  8. I don't know about you but I never post misleading information on ET.
    Maybe incorrect but not misleading

    :)
     
  9. That's quite misleading! :)
     
  10. to model this kind of trade?? poweropt only has up to a 5 leg trade... i'm with interactive brokers... anyone now where i can model this trade??
     
    #10     Feb 17, 2012