Someone in our trading room today asked what a straddle was. Everybody laughed at him! He's been around a while and knows how to trade, it was just some funny comic relief.
Major, my understanding of a long straddle is long a put and call, same strike price, same expiration, same number of contracts. Do I pass? What do I win? Actually, Smililngsynic agreed with me in stating that there was a visual relationship. That's all I was getting at. No need to go on an assumption spree. My posting doesn't warrant that much effort. Bob
Bob, Whether you short the stock and short the put or just short the call you are short the same amount of vega. So, IV has no impact on the choice of one over the other. But I'm sure you already know that and it was just a typo in your post. By the way, Schwab obviously has misappropriated the resources, it should hire more option traders and fire some of the lawyers. Letting one trade the short stock and short put, but not the short call is idiotic.
Just a FWIW, I was with Schwab circa '99-02. They used to have, like other brokers, different levels of option trading qualification based on income and experience. I believe they have changed a bit since, tho. I actually traded thru a special "Platinum" account options "team". These guys had a separate phone number and were fairly savvy on option strategies. I did many many short puts (mostly SPX, much to my regret in Sep '01 ). They used to have a floor presence, I think, and could get some decent fills. There were no restrictions that I know of. But then, I didn't push the limit...too much. Ahhh, the good ole dayz. Good luck to all.
They are not comparable, unless you find all two-legged bell-shaped risk-curves to be comparable. A short straddle has unlimited risk. You could limit that risk by opposing it with another month's straddle. Hence they are not the same at all, they differ one complete straddle. Ursa..
>> Actually, Smililngsynic agreed with me in stating that there was a visual relationship << Does my thumb resemble my other hand? Sure does, if you only show my right thumb.
Hey gang, I'm still trying to adapt to how rough these ET forums can get. Some of you are hell bent on arguing even when the other person completely agrees with you. Once I really get acclimated to this, you will find out that I have just as much fun dishing it out as receiving it. Meanwhile, today's after closing quarterly announcement by AAPL should be interesting? Bob
Don't be put off by the replies. The Options forum has always been the most intellectually rigorous area of ET. The debates here are directed at issues though, not at each other, so don't take it personally. Just keep a copy of Natenberg close at hand.
That's why most of these forums are useless. Too many in this options section waaaay over-think things and insist options "HAVE TO BE" something that they don't. Granted many here would have us believe they're trading very complex strategies (maybe so, maybe not), but many, if not most successful options trading/traders are not. Like I said, good luck to you finding any use within many of these forums. But hey, many here have 'written the book' on options trading after all.