✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
What was missing for me was a clear example of closing the positions. In order to capture the profit you have to close to sell which ever call or put has the profit to capture that profit. The same is true on a loosing position to limit the loss.
The premiums have gone dramatically up. You did the option of $200 stock with more than 45 days left to expire and locked in around $4.00. You'd be lucky to find one at this level under $15.
Hello! thanks a lot for all the great knowledge about options! I have a question to ask though, and if anyone else knows the answer please feel free to respond to my comment. Is using a straddle options strategy something prohibited by some brokers? or is it something completely acceptable by everyone?
This seems to be a good strategy for earnings announcements or dividend payouts when the price typically changes by a good amount. But how do you pick stocks that are ripe for a straddle? What if the stock is already pricing in a good or bad profit announcement and there isn't enough price change? Also for profit announcements do you want to set up 4 weeks ahead of the announcement and expire soon after, or two weeks before/after, or two weeks before and a number of weeks after? I'm thinking you'd want to go well before announcement so there is currently low implied vol being factored in and plenty of time for the market to start pricing in expected profit announcements
Keep in mind that it would be idea to enter a good 2 weeks approx before earnings to benefit from Vega and decrease risk of same Greek (depending on the stock).
Finally, i figured out what i did wrong thanks to this video. Tsla earnings play i sold a call and put at 255 expiring in two days thinking that the historically low volitility meant that the price would not move a lot and with the 20 point wings i banked $1400 credit. What i should have done was BUY the call put and let it ride. Tsla expire at high 229 which would have been $7400! Instead i incurred a loss of $600 which was the width of the wings minus the credit recieved. My first earnings play, hopefully the worst loss i will ever have - there are so many ways to play a big move and i had the most opposite set up imaginable!
Hi, Chris! Great vids as always. I'm hoping you could address this Straddle question for a noob. If I'm bullish on XYZ and all the other market signs are also pointing bullish, wouldn't it be feasible to BUY a CALL on XYZ ATM with let's say, 6 months to expiration and BUY an XYZ PUT with weeks to expiration? My take on this weekly PUT strategy is that even though you anticipate the market to trend upwards, you'll have some cheap premiums for a PUT in case XYZ were to drop. If XYZ were to drop rapidly, you can SELL your CALLS and ride the PUTS down for a profit. On the other hand, If XYZ trends upwards like you anticipated, then you can get rid of those weekly PUTS with little loss because they were so cheap. Am I making sense here? What would be the best way to tweak this strategy as it goes up or down? Thanks!!!
Cheers for this, I've been looking for "what is the safest option strategy?" for a while now, and I think this has helped. Have you ever come across - Eeyarah Mysterious Eradicator - (Have a quick look on google cant remember the place now ) ? It is a good one off product for discovering how to unlock an effective options trading method to win fast minus the normal expense. Ive heard some great things about it and my neighbour got great success with it.
Wow... this video merely only 16 min, but it took me 3X to finish it/ the notes and make my knowledge more completed in this instrument. Explicit explanation in detailed all direction/method. Have seen many lack of knowledge but already dip into this fire world.... LOLOLOLLLL... Anyway, got this strategy and will continue to get the others from your academic explanation.
What I would like to see are videos on how to manage a straddle or strangle. Let's say I buy a NTM strangle and as theta decays, the stock still hasn't moved. Does it make sense to turn the NTM strangle into a long iron condor now to decrease loss? I would also like to see such management videos on all the other option strategies. Like how to actually enter an iron condor ideally. Maybe first just buy a spread and if it doesn't work out, buy the other spread and turn it into an iron condor? Then start managing the iron condor?
What you are referring to is "legging in" to trades, meaning you put half of the position on in two separate trades and times. It's a coin toss because you might enter the whole position for a better price, but you'll also sometimes enter the entire position for a worse price than if you had entered the entire position at the start.
So if you have a bias on the price (you are very bullish or bearish), couldn’t you tweak the strategy to enhance potential profits? Example: you’re pretty bullish but still want to straddle as a hedge. So your calls are ATM, but your puts are a bit OTM. This way, you still have some hedging, but if the price moves up (as you suspected it would), your profits are higher because your initial net debit was lower. I know this somewhat defeats the purpose of a “price neutral” strategy, but curious on your thoughts.
This was great, I have been researching "how to show something is a martingale" for a while now, and I think this has helped. Have you heard people talk about - Aonyanaler Bewildering Asset - (do a search on google ) ? It is a great one of a kind product for discovering how to making money with a proven roulette system without the hard work. Ive heard some incredible things about it and my cousin got amazing success with it.
Hi, during Gap ups and gap downs, there is a significant change in the premiums and the total valuations of the premiums are increasing the net debit resulting in the crossing of breakevens and showing profit in my excel sheet, but the underlying spot spice has not crossed the breakeven yet. So, do I have profit in this situation, or am I making some mistake???
what is the point of placing a straddle over a put or call? wouldnt you make more if you placed one over the other? A straddle makes me think that the profit would cancel out the losses.. Am I wrong?
you're wrong if the stock price swings much higher from the strike price in either direction. you're correct if the stock price hovers around strike price. this is a strategy you would use with high volatility stocks that you know their stock price swings by a lot of points.
That would depend completely on the historical volatility for that option strategy, which is specific to the underlying. There are multiple free resources available where you can check this (Market Chameleon, OptionStrat, Stocksera, etc.)
Hi Chris, thanks for the video. Quick question -- say you buy a straddle ATM and then the stock price plunges enough to be profitable on the put option. Can you close the put option to lock in the profit but also keep the call option open just in case the stock price recovers or even rises past the upper breakeven? Thanks
You absolutely can do exactly that. The only drawback is you can potentially lose the value of your entire call option. If the Call is -400 of 500, but the Put is +1500 of 500, id sell both at the same time. Its still a good profit at the end of the day!
I have a question: Wouldn't an increase in price increase the price is of the call but decrease the price of the put, therefor they counteract each other and by default cause a breakeven?
all of the options greeks operate on curves. its calculus i dont get too caught up with it, just know that the further out of the money an option gets, the less it is affected by delta as a result of gamma.
The "losing side" of a straddle is time, which you can see in theta. One of the two options is simply going to be worthless, while the other will take off. You can close the straddle for maximum profit, if you're still far away from the expiration date. If the stock really takes off a lot, you might want to close only half the straddle and keep the worthless part. Then you have a chance of cashing in twice, if the trend reverses.
I enjoyed the video. I was wondering how do you calculate your profit and loss at certain stock prices? For example the stock price is 1635. how do you find the profit/loss each stock price at $50 increments within a range of $1385 and $1885, plot (1) the profit or loss on the options, (2) the profit or loss on the stock from the current stock price, and (3) the overall profit or loss of the stock plus options at option maturity
Hi Theodor, I didn't calculate the option position's P/L from the stock price. I have a database of historical option data and I used that data to calculate the option position's price and P/L over time. I hope this helps. -Chris
Yes you can, but you will turn the trade into a very directional bet depending on which side you close. If you close one side and the stock reverses, the position will end up with much larger losses compared to holding both sides of the trade.
Subject and knowledge is great . very few people would get it and SO very few people make profit in Options :) obviously . My feedback would be you are very robotic and not taking live EXamples and are not interactive so the reason for less views . though content is great .
No, the put option will become essentially worthless (depending on how much time value it has left), but the call option will continue to gain in value as long as the stock continues to rise. A good (?) strategy is to wait until the stock has made its move up or down, then sell off the losing "leg" of the trade and closely monitor the winner. For example, buy a straddle and if it shoots upward, sell the put, recouping its remaining time value, and keep the call, perhaps putting a trailing stop loss on it. Not saying this is the only way to do it. Just an idea. But, again, directly answering your question: no, the put doesn't keep getting "more negative", offsetting the profit of the call. You would lose most of the premium you paid for it, but no more.
Yes. Compared to buying just the at-the-money put or at-the-money call, you'll need more capital to buy the straddle because you're buying the at-the-money call an put at the same time, which costs more.
As I backtesting the long Straddle/Strangle it looks like more profitable than the long call, although it requires big capital which is most probably appropriate for big account something like in the tune of at least six figures.
I tried the long straddle on a highly volatile stock at 12.50. It seems that everytime the stock increases, I'm making more money on the call side then put side and when it falls below 12.50, I'm losing money on both the call and the put side. So I see what this comes down to really is, I should of just bought a call.
I checked again, stock went from 12.50 to 10.75. Losing on both puts and calls with high volatility. This method does not work. The example showed gains in the puts, no gains here.
If you buy a straddle, you'll make money on the call and lose money on the put when the stock increases. The opposite is true on the downside (put gain and call loss). You will not see any gain on the overall position unless you get a sizable move in either direction.
@@2065Dragonslayer TAHT is not a sizable move at all. Do it in earnings and you will see increases or decreases of 5+. You lost money bc it technically stayed side ways.
It’s from the shares. Options allows you control of 100 shares and every price is per share so to get the cost of the option you multiply by the 100 shares.
Hi Jak, It was just an example. I believe I used an option pricing calculator. The options in the first P/L graph example were fictional. The options in the historical trade examples were taken from historical values based on real options. -Chris
I’m a little confused about the break even. I recently bought a call and out of a stock at the same strike price at the same expiration, my debit was around 700$. How do I calculate my break even, the stock price is 83
Ok, I get it. You buy one call and one put contract at the same strike price for the same expiration date. What I don't get is how you gonna take profit if one of them would be profitable but the other one would be negative. Don't they inversely grow as the price moves a lot down or up? One is profitable and the other is way too negative. How in the hell you gonna make a profit? You let the red one expire or you wait for it to reverse?
I'm new to options, so this is an elementary question, but if I buy a call and a put, and the stock price decreases then aren't I losing money on the call while I'm gaining money on the put?
@Donny Iskandar oh definately trading in demo acct. Just didn't understand why it's popular when it seems like you're breaking even. So it sounds like you're saying the put gains more than the call loses...unless time decay or low IV are against you.
Hi Steven! Not quite. In the example you're referencing, the cost of the straddle is $834 because the put is purchased for $483 and the call is purchased for $351. $483 + $351 = $834 Paid = $834 Max Loss Potential
✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
What was missing for me was a clear example of closing the positions. In order to capture the profit you have to close to sell which ever call or put has the profit to capture that profit. The same is true on a loosing position to limit the loss.
I watch a lot of option trading videos. Yours are the best. Thanks.
I appreciate that! I'm glad they are so helpful. Many more to come!
Congratulations! Your are a great trader teacher! Very good explanation with details, example and it's free! Thanks!
The premiums have gone dramatically up. You did the option of $200 stock with more than 45 days left to expire and locked in around $4.00. You'd be lucky to find one at this level under $15.
you need lot of money bro
It takes money to make money
Has IV gone up as well though? 🤔
Hello! thanks a lot for all the great knowledge about options! I have a question to ask though, and if anyone else knows the answer please feel free to respond to my comment. Is using a straddle options strategy something prohibited by some brokers? or is it something completely acceptable by everyone?
This seems to be a good strategy for earnings announcements or dividend payouts when the price typically changes by a good amount. But how do you pick stocks that are ripe for a straddle? What if the stock is already pricing in a good or bad profit announcement and there isn't enough price change? Also for profit announcements do you want to set up 4 weeks ahead of the announcement and expire soon after, or two weeks before/after, or two weeks before and a number of weeks after? I'm thinking you'd want to go well before announcement so there is currently low implied vol being factored in and plenty of time for the market to start pricing in expected profit announcements
Keep in mind that it would be idea to enter a good 2 weeks approx before earnings to benefit from Vega and decrease risk of same Greek (depending on the stock).
Finally, i figured out what i did wrong thanks to this video. Tsla earnings play i sold a call and put at 255 expiring in two days thinking that the historically low volitility meant that the price would not move a lot and with the 20 point wings i banked $1400 credit. What i should have done was BUY the call put and let it ride. Tsla expire at high 229 which would have been $7400! Instead i incurred a loss of $600 which was the width of the wings minus the credit recieved.
My first earnings play, hopefully the worst loss i will ever have - there are so many ways to play a big move and i had the most opposite set up imaginable!
Watch out for volatility crush on earnings!
Can you close one side of the straddle when the price goes up and then close the other side when it goes down?
Hi, Chris! Great vids as always. I'm hoping you could address this Straddle question for a noob.
If I'm bullish on XYZ and all the other market signs are also pointing bullish, wouldn't it be feasible to BUY a CALL on XYZ ATM with let's say, 6 months to expiration and BUY an XYZ PUT with weeks to expiration? My take on this weekly PUT strategy is that even though you anticipate the market to trend upwards, you'll have some cheap premiums for a PUT in case XYZ were to drop. If XYZ were to drop rapidly, you can SELL your CALLS and ride the PUTS down for a profit. On the other hand, If XYZ trends upwards like you anticipated, then you can get rid of those weekly PUTS with little loss because they were so cheap. Am I making sense here? What would be the best way to tweak this strategy as it goes up or down? Thanks!!!
cost!!!!! single legs are more expensive and leave exposure to loses
Cheers for this, I've been looking for "what is the safest option strategy?" for a while now, and I think this has helped. Have you ever come across - Eeyarah Mysterious Eradicator - (Have a quick look on google cant remember the place now ) ? It is a good one off product for discovering how to unlock an effective options trading method to win fast minus the normal expense. Ive heard some great things about it and my neighbour got great success with it.
That's a decent ideal
@@miguelrebolledo6291 I Googled that but nothing came up
Thanks for the detailed examples
You're welcome! Glad you liked them.
Wow... this video merely only 16 min, but it took me 3X to finish it/ the notes and make my knowledge more completed in this instrument.
Explicit explanation in detailed all direction/method.
Have seen many lack of knowledge but already dip into this fire world.... LOLOLOLLLL...
Anyway, got this strategy and will continue to get the others from your academic explanation.
Thanks! Very clear and informative!
You're welcome and thanks for the comment!
What I would like to see are videos on how to manage a straddle or strangle. Let's say I buy a NTM strangle and as theta decays, the stock still hasn't moved. Does it make sense to turn the NTM strangle into a long iron condor now to decrease loss?
I would also like to see such management videos on all the other option strategies. Like how to actually enter an iron condor ideally. Maybe first just buy a spread and if it doesn't work out, buy the other spread and turn it into an iron condor? Then start managing the iron condor?
What you are referring to is "legging in" to trades, meaning you put half of the position on in two separate trades and times. It's a coin toss because you might enter the whole position for a better price, but you'll also sometimes enter the entire position for a worse price than if you had entered the entire position at the start.
Did you pay the man? Otherwise you look kinda silly ordering a bunch of vids...
So if you have a bias on the price (you are very bullish or bearish), couldn’t you tweak the strategy to enhance potential profits?
Example: you’re pretty bullish but still want to straddle as a hedge. So your calls are ATM, but your puts are a bit OTM. This way, you still have some hedging, but if the price moves up (as you suspected it would), your profits are higher because your initial net debit was lower.
I know this somewhat defeats the purpose of a “price neutral” strategy, but curious on your thoughts.
If your bullish on the dirrection of a stock. Is it possible to sell an atm put & buy an otm call?
Yep
does it make sense to use this strategy for short term plays on leveraged ETFs?
Hello Chris what time frame is best when trading straddles?
Thanks brother dropping knowledge
Thank You Very Much
Thank you so much for very detail information-Help me a lot to understand much more about long straddle.
This was great, I have been researching "how to show something is a martingale" for a while now, and I think this has helped. Have you heard people talk about - Aonyanaler Bewildering Asset - (do a search on google ) ? It is a great one of a kind product for discovering how to making money with a proven roulette system without the hard work. Ive heard some incredible things about it and my cousin got amazing success with it.
Excellent information with amazing info graphics. Liked and subbed love the content!
Thank you! I'm glad you liked the video.
-Chris
Hi, during Gap ups and gap downs, there is a significant change in the premiums and the total valuations of the premiums are increasing the net debit resulting in the crossing of breakevens and showing profit in my excel sheet, but the underlying spot spice has not crossed the breakeven yet. So, do I have profit in this situation, or am I making some mistake???
Would love to see feed back on day trading this strategy, buy on open then sell 1 hour later.
Is this with writing options ? I can’t write options on wealth simple im in Canada and not sure what platforms allow it
what is the point of placing a straddle over a put or call? wouldnt you make more if you placed one over the other? A straddle makes me think that the profit would cancel out the losses.. Am I wrong?
you're wrong if the stock price swings much higher from the strike price in either direction. you're correct if the stock price hovers around strike price. this is a strategy you would use with high volatility stocks that you know their stock price swings by a lot of points.
Well done, thank you.
You got it! Thanks for watching
@@projectfinance ъъ
Hi thanks for the video. When doing long straddles 2-3 weeks out of event (typically earnings), what IV are you looking for?
That would depend completely on the historical volatility for that option strategy, which is specific to the underlying. There are multiple free resources available where you can check this (Market Chameleon, OptionStrat, Stocksera, etc.)
low iv
how is gamma calculated ex price of stock goes up 5% then down 10%...vega is 1$ for 1%...in this case is 15% or 5%(the difference)?
Good explanation
Thank you!
Appreciate the detail!
No problem!
Do you recommend practicing all these strategies using paper-trading, for beginners at least?
Definitely practice on paper for a couple weeks at least before doing it live
GREAT.
Quick question. You ever scan for gainers and spread option them with straddles?
Now thats how you do it
Hi Chris, thanks for the video. Quick question -- say you buy a straddle ATM and then the stock price plunges enough to be profitable on the put option. Can you close the put option to lock in the profit but also keep the call option open just in case the stock price recovers or even rises past the upper breakeven? Thanks
You absolutely can do exactly that. The only drawback is you can potentially lose the value of your entire call option. If the Call is -400 of 500, but the Put is +1500 of 500, id sell both at the same time. Its still a good profit at the end of the day!
Yes, of course
I have a question:
Wouldn't an increase in price increase the price is of the call but decrease the price of the put, therefor they counteract each other and by default cause a breakeven?
all of the options greeks operate on curves. its calculus i dont get too caught up with it, just know that the further out of the money an option gets, the less it is affected by delta as a result of gamma.
How do you predict a large price swing in only 78 days? What is a real-world scenario that would make this kind of trade tempting to someone?
Brexit or an annual report
Momentum stocks, meme stocks
once the stock moves wouldnt you just sell the losing side of the straddle right away for max profit
The "losing side" of a straddle is time, which you can see in theta. One of the two options is simply going to be worthless, while the other will take off. You can close the straddle for maximum profit, if you're still far away from the expiration date. If the stock really takes off a lot, you might want to close only half the straddle and keep the worthless part. Then you have a chance of cashing in twice, if the trend reverses.
I enjoyed the video. I was wondering how do you calculate your profit and loss at certain stock prices? For example the stock price is 1635. how do you find the profit/loss each stock price at $50 increments within a range of $1385 and $1885, plot (1) the profit or loss on the options, (2) the profit or loss on the stock from the current stock price, and (3) the overall profit or loss of the stock plus options at option maturity
Hi Theodor,
I didn't calculate the option position's P/L from the stock price. I have a database of historical option data and I used that data to calculate the option position's price and P/L over time.
I hope this helps.
-Chris
your greek delta for every one dollar move is how much the delta is
So can you close one call and leave the other open?
Yes you can, but you will turn the trade into a very directional bet depending on which side you close. If you close one side and the stock reverses, the position will end up with much larger losses compared to holding both sides of the trade.
@@projectfinanceclose and lock the profit. The other side is already at loss , no point in closing that. Wait for to reverse ?
@@ks-fz9fqHave you developed a preference for this situation?
Subject and knowledge is great . very few people would get it and SO very few people make profit in Options :) obviously .
My feedback would be you are very robotic and not taking live EXamples and are not interactive so the reason for less views . though content is great .
I thought since u r buying a put and a call and lets say the call option is gaining, the pull option will offset it resulting in 0 gains
No, the put option will become essentially worthless (depending on how much time value it has left), but the call option will continue to gain in value as long as the stock continues to rise. A good (?) strategy is to wait until the stock has made its move up or down, then sell off the losing "leg" of the trade and closely monitor the winner. For example, buy a straddle and if it shoots upward, sell the put, recouping its remaining time value, and keep the call, perhaps putting a trailing stop loss on it. Not saying this is the only way to do it. Just an idea.
But, again, directly answering your question: no, the put doesn't keep getting "more negative", offsetting the profit of the call. You would lose most of the premium you paid for it, but no more.
so you need a larger captial to do this because you have to buy two things for the straddle??
Yes. Compared to buying just the at-the-money put or at-the-money call, you'll need more capital to buy the straddle because you're buying the at-the-money call an put at the same time, which costs more.
As I backtesting the long Straddle/Strangle it looks like more profitable than the long call, although it requires big capital which is most probably appropriate for big account something like in the tune of at least six figures.
How far out should you set your expiration date for this type of strategy?
i would say anything 45 to 60 days or even longer if the earning date is within your option thats even better because for sure stock will move one way
I tried the long straddle on a highly volatile stock at 12.50. It seems that everytime the stock increases, I'm making more money on the call side then put side and when it falls below 12.50, I'm losing money on both the call and the put side. So I see what this comes down to really is, I should of just bought a call.
I checked again, stock went from 12.50 to 10.75. Losing on both puts and calls with high volatility. This method does not work. The example showed gains in the puts, no gains here.
If you buy a straddle, you'll make money on the call and lose money on the put when the stock increases. The opposite is true on the downside (put gain and call loss). You will not see any gain on the overall position unless you get a sizable move in either direction.
I did get a sizable move. From 12.50 to 10.00. At 10.00 I lost 150.00 with the put saying -30.00.
@@2065Dragonslayer TAHT is not a sizable move at all. Do it in earnings and you will see increases or decreases of 5+. You lost money bc it technically stayed side ways.
Thank you
I didn't get where the 100x come from. He said he bought 250 of each. Why do times 100?
It’s from the shares. Options allows you control of 100 shares and every price is per share so to get the cost of the option you multiply by the 100 shares.
how are you getting such similarly priced options. Every stock i look at the in the money option is almost triple the OTM
Hi Jak,
It was just an example. I believe I used an option pricing calculator. The options in the first P/L graph example were fictional.
The options in the historical trade examples were taken from historical values based on real options.
-Chris
A symmetric straddle doesn't have ITM or OTM options. It only has ATM options.
I’m a little confused about the break even. I recently bought a call and out of a stock at the same strike price at the same expiration, my debit was around 700$. How do I calculate my break even, the stock price is 83
Call Strike Price + Debit Paid. In your case, the option price was $7.00. Your breakeven AT EXPIRATION is the strike price + $7.00.
why wouldn't the put and call cancel each other out?
You are free to sell the call or put anytime once the move starts to gain momentum
You're not entering a short position with a straddle. Both the put and call are long positions. One will have value and the other will be worthless.
Ok, I get it. You buy one call and one put contract at the same strike price for the same expiration date. What I don't get is how you gonna take profit if one of them would be profitable but the other one would be negative. Don't they inversely grow as the price moves a lot down or up? One is profitable and the other is way too negative. How in the hell you gonna make a profit? You let the red one expire or you wait for it to reverse?
I'm new to options, so this is an elementary question, but if I buy a call and a put, and the stock price decreases then aren't I losing money on the call while I'm gaining money on the put?
@Rob Bon but I still don't understand. If you are gaining ng on the put and losing on the call, then you're at break even. How is there a profit?
@Donny Iskandar oh definately trading in demo acct. Just didn't understand why it's popular when it seems like you're breaking even. So it sounds like you're saying the put gains more than the call loses...unless time decay or low IV are against you.
Wouldn't one of the options be out of the money ?
hard ro understand
for potential loss, wouldn't it be $1668? because you're buying 2 orders, one call & one put.
Hi Steven!
Not quite. In the example you're referencing, the cost of the straddle is $834 because the put is purchased for $483 and the call is purchased for $351.
$483 + $351 = $834 Paid = $834 Max Loss Potential
Isn’t this a strangle
6 hundredth like
Hot dog