option straddles

  1. 1,368 Posts.
    Straddles on options are an effective method of having a bet each way. It allows you to stay in the market to catch the big moves, and you wont be faked out by all the little moves. Target profit is 20-30% over a month, or take profit if it happens in less time. These are not daytrades, they have a 2 week view.

    Let me say right up front that I often discuss theoretical trades, and I may or may not be trading these for real. You should not put real money on these. The aim is to get a better understanding of options and its theory. We may all learn something useful that we can make money on in the future.

    I stay away from warrants because I cant dial my own strike prices and expiry dates.
    Im using a system that looks for low volatility, and tries to predict when a stock may breakout of its range. To win, we want the stock to move by more than the total cost of the straddle. Ideally, either the call or put will be worthless, and the other side will keep rising . This system has worked well over Jan, Feb and Mar.
    I often end up with a basket of 4 or 5 stocks with some in the red and some in the black. I wait until the total position is in profit and then liquidate the lot.Equal amounts on all trades. That being said, I have been lucky, and must be due for losses soon. I don’t mind, because I need to see how far the downside is anyway, to compare risk/reward ratios.

    Youre welcome to follow these trades, and join in the discussions.

    7/3 bought nab Mar expiry strike 29.50, call .50, put .685, straddle 1.185
    current nab straddle still 1.18 -.005
    been on nab a week, nothing happening yet.

    ncp looks like breaking out
    13/3 ncp mar 9.50 , call .525, put .275, straddle .80

    cba ‘s volatility has been low and just turned up
    13/3 mar 23.50. call .41, put .605, straddle 1.015

    rio is also in a similar position to cba and due to move
    13/3 mar 30.50, call .84, put .47, straddle 1.31


    I considered selling straddles, but things look unclear. TLS and CML look the leading canidates for these. Selling is fine where we expect things to settle down for a while, and time decay will eat into the buyers profits. So far, Im not selling anything.

    For those looking at other stocks, wbc and anz are unclear as are wow and amp.
    I don’t touch naked calls or puts but good luck to those who do.

    Im researching a viewless trading system, and have been following systems for years, (for those who don’t know me). I don’t care if these stocks go up or down, as long as they move. Yes, Im trading volatility, and its not completely risk free, as vola may fall, but this system has been showing a win rate of 70-75% so far.

    Get access to Commsec ,Sanfords or ASX www to get option quotes and split the bid/ask in half to decide what you could buy or sell for.

    I'll update these every few days. I think there will be considerable action by mid next week. Lets see.

    Cheers.
 
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