Phenomenal video. Very educational and informative. I would love to see such a detailed video on determining whether or not to roll or close a straddle based upon its intrinsic vs. extrinsic values and conditions in the market. New subscriber, thank you for the excellent analysis.
This is a very clear video and good explanations. I can't understand the appeal of a speculation with a loss potentially of infinity and a capped profit potential.
Excellent! Logical. Would like to see examples, but maybe in another video. Would love to see equal balanced long straddle conclusion when appropriate.
it is indeed very nice one. Can you do a 'scan for straddle' underlines video? so we can find the best canadidate on the daily basis... thanks in advance
Being also new, I agree with "Paindoc" (from 2 y.o.); but want to know if link could be provided how to set up limit orders because exit strategy talks about Straddle price but limit orders seem to exit for only individual legs separately? What am I missing?
It seems like a short straddle is similar to an Iron Condor. Being that you bet in the range you wish it to be in. The difference I guess would be that with an IC, you set the +- strikes by placing shorting call spread and a put spread at the desired strike range +-. There is a defined risk and a defined reward. I like IC's over short straddles because of the defined risk/reward. This means, smaller traders can get into more options trading easier.
If my brokerage doesn’t allow for Straddles but if like on the right side example “Long Straddle”, If I buy both options separately, can I track it the same as the long straddle strategy on Optionstrat n Optionsprofitcalculator?
Hi, there! Great vid. 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. Does this make any sense to you? Thanks!!!
Hi Geoff, Thanks for the question. I'd say the answer depends on what you compare that strategy to. Since it seems like your main goal with this strategy is to create a bullish position with an acceptable level of risk, I will compare this strategy to a standard long call (with 6 months to expiration). Firstly, buying a put in addition to buying a call will increase your max risk since you have to pay to open the position. This will also push up your upper break-even point which means that XYZ will have to rise even more for you to make a profit. Also, the notion that 1 week options are always cheap isn't necessarily correct either. If, for instance, short-term IV is much higher than long-term IV, the 1 week option can be relatively expensive. But even in normal circumstances, short-term options aren't always cheap. For example, right now, 10 day SPY ATM options cost around $7 whereas 100 day SPY ATM options cost $21. Buying those $7 ATM 1 week puts purely as protection will increase your risk by another $700. Last but not least, this kind of protection is very short-sighted since it will only last you around 1 week. Re-buying the puts every time the last ones expire isn't a viable option either since this will just continually increase your risk and move out your break-even points. I hope this points out a few problems of why this strategy probably isn't the best choice for a bullish position. Definitely let me know if you have any follow-up questions or comments.
@@TradeOptionsWithMe Thank you for responding! I see your point. So how would I hedge my bullish option positions? For example, I read that if you own 10 calls, you should purchase 1 put (10%) of your calls in case it were to move downwards. Does that sound correct to you? If not, how would you hedge a bullish position? Bests!
Hi Geoff, Firstly, there are many different kind of bullish option positions. So how to hedge really depends on the strategy. But if you are just buying calls, I see no need to hedge since a long call already has limited downside risk. If you want to reduce this risk, I recommend just buying fewer contracts instead of buying a put option. If you want a list of different bullish options strategies, you could check out this tool: tradeoptionswithme.com/strategy-selection/ Simply select bullish as the directional assumption and a list of bullish options strategies will be displayed. If you only want to view those with limited risk, you can select that as well. I hope this helps.
Thanks for the positive feedback. I’m working on more videos right now, but creating them takes a lot of time. If you have any specific suggestions for future videos that you want to see, definitely let me know.
Short straddles have a negativ Vega which means they profit from a drop in IV. That’s why it’s good to open them when IV is high so that the position can profit from an IV decrease.
Louis, I think Short Straddle is more like Butterfly but without limited risk. I'd prefer Butterfly strategy instead. Whats Delta should we pick on Call n Put side? ( I use Interactive Broker so no POP menu).Thanks
That’s right. Butterflies have a very similar payoff profile as straddles, just with limited risk. However, they are set up a little differently. I trade straddles and butterflies as neutral strategies. So I usually just go for ATM strikes and don’t pay too much attention to the deltas of the individual strikes. I hope this helps.
Thanks for the good video. For a short straddle, what kind of stocks do you guys have on the watchlist that you guys think it is not volatile? In another words, what are some non-volatile stocks?
Thanks for your comment. I don’t really have a list of stocks that are always great for short straddles. The list changes all the time. The main indicator that I look at is implied volatility. The higher IV is, the more premium you will receive for selling a short straddle and the further out your break even points are. If you want to sell straddles on stocks with relatively low historical volatility, you could also look at the daily/weekly/monthly range of the stock over the past couple of weeks/months and choose those that have a relatively small range and a relatively high IV. I really hope this helps.
Long straddles profit if the price of the underlying is either above the upper or below the lower breakeven point. If the underlying’s price is in between the breakeven points, the straddle will end with a loss.
Sir may I ask how to reduce breakeven in long straddle like which strikes we should select itm atm as generally long straddle premium high and it loses premiums. Plz assist
Thanks for the comment. Usually, you would go with ATM strikes for straddles. Since long straddles are long premium strategies they have a positive Vega which means they lose money from drops in IV. That’s why it’s best to open them when IV isn’t too high. Furthermore, you should also expect a relatively big price move since it otherwise wouldn’t be profitable. The direction of the size move, however, doesn’t matter.
@@TradeOptionsWithMe Two quick questions, 1. Once the credit is received into the account, how soon can the trade be closed if the option in between the not moved much from the strike price /could I close the position before the expiration of the option: 2. Could I open a short straddle position which has say 7-20 days left to the date of expiry? Thanks in advance.
Thanks for the questions. 1. You could pretty much immediately close the straddle after you opened it. Just note that doing this likely won’t yield you a profit since you have to pay to close the position. Every day that you wait and the stock price does not move significantly, some of the straddle’s value decays which means you would have to pay less to close it. Instead of closing it, you could also wait until expiration. If, at expiration, the stock price is in between the short strikes, the straddle will be worthless, and you won’t have to pay anything to close it. But usually you will want to close the position before expiration. 2. That’s definitely possible. The number of days till expiration is totally up to you. Just note that the closer you are to expiration, the less credit you will collect which means that you typically have to go narrower. I hope this helps.
That is a rather uncommon strategy that is usually referred to as a covered straddle (or covered combination). Its payoff profile is basically a steeper version of a covered call’s payoff profile. Overall your market assumption with such a strategy is bullish. If you get assigned, your shares either get called away or you receive more. I hope this helps.
@@TradeOptionsWithMe Thanks... If it goes down and the put gets exercised / assigned to you, and you don't have the cash but since you own the stock, will the broker just sell enough of your stock at the ask and then buy it back at the put strike price? And you lose the difference of the stock price but keep all the premium of the put and the call. Does that sound correct? I think I get it and rather like it.
Usually when you get assigned, your broker either buys or sells the given number of shares at the strike price. If you don’t have enough buying power, most brokers will automatically close the new position at the current market price or close your existing position in that stock (if you have one). If you want to learn more about assignment, I recommend checking out my video on assignment: ua-cam.com/video/QbbkyHgZz4A/v-deo.html
As of right now, I do not have any open long straddle positions. IV is currently very high for most securities which makes options quite expensive. That's one reason why I don't have such a position open.
This video was insanely clear with zero filler or bullshit. Thank you
One of the best and most clear explanations I’ve heard on UA-cam 👌
Thank you for explaining the straddles, this is the best explanation I have seen!!
Excellent presentation. Best I've seen so far. Thank you!
Phenomenal video. Very educational and informative. I would love to see such a detailed video on determining whether or not to roll or close a straddle based upon its intrinsic vs. extrinsic values and conditions in the market. New subscriber, thank you for the excellent analysis.
One of the best videos I have seen on this topic. So well explained. Thanks
the best and crisp presentation . great learning from your video. thanks a ton
You are very welcome!
This is a very clear video and good explanations. I can't understand the appeal of a speculation with a loss potentially of infinity and a capped profit potential.
Visualizing options helps alot ... and so does your clear explanations ... great job 👌
A true gem in the wild. Thank you.
Thank you for making this video on a complex subject and make it easy to understand.
Glad you liked it!
great explanation, after so many videos and roaming around youtube i finally have a better understanding of it.Thanks
Glad you liked it!
Excellent! Logical. Would like to see examples, but maybe in another video. Would love to see equal balanced long straddle conclusion when appropriate.
Subbed and liked. Thank you!
Great explanation, thanks, slow, clear, methodical
👌 👏 wow...Excellent. Thank you
Greeks are explained splendidly. Thanks :)
Outstanding video… very good depictions and very good explanations..
Best explanation so far...thanks
nice explanation do more trading and options on data decision trades that will be profitable
it is indeed very nice one. Can you do a 'scan for straddle' underlines video? so we can find the best canadidate on the daily basis... thanks in advance
You are a very good UA-camr
Thank you!
Awsome educational video.thanks
Phenomenal breakdown
Being also new, I agree with "Paindoc" (from 2 y.o.); but want to know if link could be provided how to set up limit orders because exit strategy talks about Straddle price but limit orders seem to exit for only individual legs separately? What am I missing?
Excellent information
Absolutely excellent video, than you 🙏
It seems like a short straddle is similar to an Iron Condor. Being that you bet in the range you wish it to be in. The difference I guess would be that with an IC, you set the +- strikes by placing shorting call spread and a put spread at the desired strike range +-. There is a defined risk and a defined reward.
I like IC's over short straddles because of the defined risk/reward. This means, smaller traders can get into more options trading easier.
Thanks for sharing your thoughts. I’d say the undefined risk version of an iron condor is a strangle, but a straddle is pretty similar as well.
Short straddles seem like a great strategy during times of stock price consolidation/squeeze.
If my brokerage doesn’t allow for Straddles but if like on the right side example “Long Straddle”,
If I buy both options separately, can I track it the same as the long straddle strategy on Optionstrat n Optionsprofitcalculator?
Do you have a similar video on Strangles too?? I do not seem to see it in your list
Would love to know what you used to crest the video. I am looking to use a clear style like this as tutorials for math for kids. Can you share info?
The software is called Videoscribe
@@TradeOptionsWithMe Thank you!
Hi, there! Great vid. 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. Does this make any sense to you? Thanks!!!
Hi Geoff,
Thanks for the question. I'd say the answer depends on what you compare that strategy to. Since it seems like your main goal with this strategy is to create a bullish position with an acceptable level of risk, I will compare this strategy to a standard long call (with 6 months to expiration).
Firstly, buying a put in addition to buying a call will increase your max risk since you have to pay to open the position. This will also push up your upper break-even point which means that XYZ will have to rise even more for you to make a profit.
Also, the notion that 1 week options are always cheap isn't necessarily correct either. If, for instance, short-term IV is much higher than long-term IV, the 1 week option can be relatively expensive. But even in normal circumstances, short-term options aren't always cheap. For example, right now, 10 day SPY ATM options cost around $7 whereas 100 day SPY ATM options cost $21.
Buying those $7 ATM 1 week puts purely as protection will increase your risk by another $700.
Last but not least, this kind of protection is very short-sighted since it will only last you around 1 week. Re-buying the puts every time the last ones expire isn't a viable option either since this will just continually increase your risk and move out your break-even points.
I hope this points out a few problems of why this strategy probably isn't the best choice for a bullish position. Definitely let me know if you have any follow-up questions or comments.
@@TradeOptionsWithMe Thank you for responding! I see your point. So how would I hedge my bullish option positions? For example, I read that if you own 10 calls, you should purchase 1 put (10%) of your calls in case it were to move downwards. Does that sound correct to you? If not, how would you hedge a bullish position? Bests!
Hi Geoff,
Firstly, there are many different kind of bullish option positions. So how to hedge really depends on the strategy. But if you are just buying calls, I see no need to hedge since a long call already has limited downside risk. If you want to reduce this risk, I recommend just buying fewer contracts instead of buying a put option.
If you want a list of different bullish options strategies, you could check out this tool: tradeoptionswithme.com/strategy-selection/
Simply select bullish as the directional assumption and a list of bullish options strategies will be displayed. If you only want to view those with limited risk, you can select that as well.
I hope this helps.
Simple neutral explanation 👏
Very well explained
Very succinct and helpful. How can we get more videos from you?
Thanks for the positive feedback. I’m working on more videos right now, but creating them takes a lot of time.
If you have any specific suggestions for future videos that you want to see, definitely let me know.
Thanks for this. Well done video.
Why is high IV good for short straddles? Doesnt that mean theres a higher chance that the stock will make a major move up or down?
Short straddles have a negativ Vega which means they profit from a drop in IV. That’s why it’s good to open them when IV is high so that the position can profit from an IV decrease.
very nice explaination
......
Very nice and informative.
Thanks!
If I’m one of the short or long how I can close the position before the expiration date?
Louis, I think Short Straddle is more like Butterfly but without limited risk. I'd prefer Butterfly strategy instead. Whats Delta should we pick on Call n Put side? ( I use Interactive Broker so no POP menu).Thanks
That’s right. Butterflies have a very similar payoff profile as straddles, just with limited risk. However, they are set up a little differently. I trade straddles and butterflies as neutral strategies. So I usually just go for ATM strikes and don’t pay too much attention to the deltas of the individual strikes.
I hope this helps.
TradeOptionsWithMe thanks
Thanks for the good video. For a short straddle, what kind of stocks do you guys have on the watchlist that you guys think it is not volatile?
In another words, what are some non-volatile stocks?
Thanks for your comment. I don’t really have a list of stocks that are always great for short straddles. The list changes all the time. The main indicator that I look at is implied volatility. The higher IV is, the more premium you will receive for selling a short straddle and the further out your break even points are. If you want to sell straddles on stocks with relatively low historical volatility, you could also look at the daily/weekly/monthly range of the stock over the past couple of weeks/months and choose those that have a relatively small range and a relatively high IV.
I really hope this helps.
Great video. Thanks
Ty
superb explanation
Thank you!
Great job! Learned a lot
Excellent video!!! Thanks!!! Maybe you could add some real live examples. Thanks again!!
Thanks for the feedback!
So the long straddle profits even if price falls beyond BEP?
Long straddles profit if the price of the underlying is either above the upper or below the lower breakeven point. If the underlying’s price is in between the breakeven points, the straddle will end with a loss.
Thanks 👍👍
Sir may I ask how to reduce breakeven in long straddle like which strikes we should select itm atm as generally long straddle premium high and it loses premiums. Plz assist
Thanks for the comment. Usually, you would go with ATM strikes for straddles. Since long straddles are long premium strategies they have a positive Vega which means they lose money from drops in IV. That’s why it’s best to open them when IV isn’t too high. Furthermore, you should also expect a relatively big price move since it otherwise wouldn’t be profitable. The direction of the size move, however, doesn’t matter.
Good work.
Superbly explained, thank you so much!
You are very welcome.
@@TradeOptionsWithMe Two quick questions,
1. Once the credit is received into the account, how soon can the trade be closed if the option in between the not moved much from the strike price /could I close the position before the expiration of the option:
2. Could I open a short straddle position which has say 7-20 days left to the date of expiry?
Thanks in advance.
Thanks for the questions.
1. You could pretty much immediately close the straddle after you opened it. Just note that doing this likely won’t yield you a profit since you have to pay to close the position. Every day that you wait and the stock price does not move significantly, some of the straddle’s value decays which means you would have to pay less to close it. Instead of closing it, you could also wait until expiration. If, at expiration, the stock price is in between the short strikes, the straddle will be worthless, and you won’t have to pay anything to close it. But usually you will want to close the position before expiration.
2. That’s definitely possible. The number of days till expiration is totally up to you. Just note that the closer you are to expiration, the less credit you will collect which means that you typically have to go narrower.
I hope this helps.
@@TradeOptionsWithMe Thank you very much for the reply!
This one's really gonna help me with my class presentation. Thanks a ton ❤️
Really best
What trading broker available in the UK can allow these types of trades
Every broker that supports options
Thnx ,god bless u
What is a short straddle called when you own the stock. And how is it different? what happens if it gets exercised?
That is a rather uncommon strategy that is usually referred to as a covered straddle (or covered combination). Its payoff profile is basically a steeper version of a covered call’s payoff profile. Overall your market assumption with such a strategy is bullish. If you get assigned, your shares either get called away or you receive more.
I hope this helps.
@@TradeOptionsWithMe Thanks... If it goes down and the put gets exercised / assigned to you, and you don't have the cash but since you own the stock, will the broker just sell enough of your stock at the ask and then buy it back at the put strike price? And you lose the difference of the stock price but keep all the premium of the put and the call. Does that sound correct? I think I get it and rather like it.
Usually when you get assigned, your broker either buys or sells the given number of shares at the strike price. If you don’t have enough buying power, most brokers will automatically close the new position at the current market price or close your existing position in that stock (if you have one).
If you want to learn more about assignment, I recommend checking out my video on assignment: ua-cam.com/video/QbbkyHgZz4A/v-deo.html
Do you have any long straddle positions now?
As of right now, I do not have any open long straddle positions. IV is currently very high for most securities which makes options quite expensive. That's one reason why I don't have such a position open.
Great video !great explanation! However drive k some cofee you sound asleep 😄
Haha thank you for the feedback!
Long straddles for binary events fomc minutes, drug companies, etc.
Good... can we buy and sell on the same day... anyone can answer pl...
Yes, but be aware of the PDT rule though
Isn’t a short straddle just a strangle ?
No a strangle is similar to a straddle but the difference is that the strike prices aren’t the same.
@@TradeOptionsWithMe got ya!
Improve audio
Thanks for the feedback
@@TradeOptionsWithMe appreciate your reply.