One of the modifiers i use with strangle and straddle trades is to simply close the entire position out within 15 days of expiration if you are in a loss and even in a profit,, unless the momentum of the underlying is very strong. Otherwise the loss of theta is eating away your profit at a fast pace. The second concept is that when you enter these trades initially you should see significant movement relatively soon after entry or else its probably not going to happen,, therefore just close it out with some time value minimizing your overall loss and move on. The theta loss curve is steep in the last 15 days.
Bro you ain't lyin'. Proper management is critical with options strategies. Managing losses due to Theta close to expiration on a long position should be fundamental.
Excellent explanation. The correlation between the stock price and option price makes it easy to understand why exhausting the days of expiration is clearly not advisable. With both graphs, one on top of the other, it becomes cristal clear.
Thank you, Henry! I will turn up the volume in future videos. However, I believe I recorded my older videos with the mic volume not at 100%, but these days I do. So, some of the newer videos may be better. I will look into this and make some comparisons. Thank you for the suggestion! -Chris
Do most options trader use this strategy or they just buy straight call or put? I only used the simple call buy/sell method. I may try this strangle strategy out.
Thanks for the great video. My question might seem stupid but when you want to close your strangle, can you just sell the call or the put or you have to close the entire position (strangle)?
You can sell them individually. Sure. But are you just assuming the market is going to do what you want it to? You'll just enter into a long put or call that is up by x amount... And it can increase or decrease. Sometimes it's wiser to just accept your calculated profit. You're suggesting greedy behavior that is likely to backfire on you quite often. Traders who get greedy and don't take their profits get burned more often than not
In the second example, 12:15, would you consider selling the profitable long put before expiration and continue holding the depreciated long call for a while longer? In hindsight, of course, that strategy would have been optimum in that example, but would you try for a rebound in the depreciated leg by itself without hindsight? The depreciated leg would have little sensitivity to the underlying stock price at that point, but if there were not much value left in the depreciated leg, there may be little additional risk to wait-and-see. I guess a lot depends on why the stock dropped so sharply and whether technicals indicated an oversold condition.
Really well explain. What would happen if you buy these options closer to the strike price. Do you think it will give you a good probability to make profit. Thanks
Thank you, Nick! Glad you found the video to be helpful. If you buy options with strike prices closer to the stock price, you'll pay more overall for the strangle and therefore have more loss potential. However, you'll also have a higher probability of having the stock price beyond one of the strike prices since they're closer to the stock price. When buying strangles, there will always be a low probability of profiting substantially from the trade, but the probability is likely to be higher when buying options closer to the stock price. In short, it's a give and take relationship between probability of making money and premium paid (which is the loss potential). I hope this helps. -Chris
I just put one of these on for the first time on WISH expiration August 27, two days before earnings. The put was up 140% before the close and the announcement (which was bad), we'll see what happens tomorrow.
If you own the options and you let them expire in-the-money, the options will automatically be exercised and you'll end up with a long or short stock position depending on the type of option you allowed to expire in-the-money.
Gentlemen please throw some light on the following query. chuck hughes sells a strategy called GROW. there in i saw in an uptrend nearing end he buys a deep itm call option and then buys an atm put. the call and put get interlocked. thereafter any big move upside or downside brings good profit. question is does he use delta values to choose call and put or any other way the call put strikes can be chosen more reliably please comment thanks in advance
One of the modifiers i use with strangle and straddle trades is to simply close the entire position out within 15 days of expiration if you are in a loss and even in a profit,, unless the momentum of the underlying is very strong. Otherwise the loss of theta is eating away your profit at a fast pace. The second concept is that when you enter these trades initially you should see significant movement relatively soon after entry or else its probably not going to happen,, therefore just close it out with some time value minimizing your overall loss and move on. The theta loss curve is steep in the last 15 days.
Bro you ain't lyin'. Proper management is critical with options strategies. Managing losses due to Theta close to expiration on a long position should be fundamental.
Excellent explanation. The correlation between the stock price and option price makes it easy to understand why exhausting the days of expiration is clearly not advisable. With both graphs, one on top of the other, it becomes cristal clear.
This was really good man thank you! It exposes why my trades didn’t turn profitable in the past
Glad you liked it! Thanks for tuning in.
I really like your videos tutorials, could you set them so that they have higher sound volume?
Thank you, Henry!
I will turn up the volume in future videos.
However, I believe I recorded my older videos with the mic volume not at 100%, but these days I do. So, some of the newer videos may be better.
I will look into this and make some comparisons.
Thank you for the suggestion!
-Chris
UA-cam normalizes audio, he can't move it too much or else UA-cam will automatically adjust it back down upon upload.
This is awesome! Going to use this technique on tesla with expiration on 24th Dec
Do most options trader use this strategy or they just buy straight call or put? I only used the simple call buy/sell method. I may try this strangle strategy out.
Thanks for the great video. My question might seem stupid but when you want to close your strangle, can you just sell the call or the put or you have to close the entire position (strangle)?
You can sell them individually. Sure. But are you just assuming the market is going to do what you want it to? You'll just enter into a long put or call that is up by x amount... And it can increase or decrease. Sometimes it's wiser to just accept your calculated profit. You're suggesting greedy behavior that is likely to backfire on you quite often. Traders who get greedy and don't take their profits get burned more often than not
@@howardhughes229 useful points indeed. psychology if not tuned creates more losses. sticking to calculated risk is safest.
In the second example, 12:15, would you consider selling the profitable long put before expiration and continue holding the depreciated long call for a while longer? In hindsight, of course, that strategy would have been optimum in that example, but would you try for a rebound in the depreciated leg by itself without hindsight? The depreciated leg would have little sensitivity to the underlying stock price at that point, but if there were not much value left in the depreciated leg, there may be little additional risk to wait-and-see. I guess a lot depends on why the stock dropped so sharply and whether technicals indicated an oversold condition.
Really well explain. What would happen if you buy these options closer to the strike price. Do you think it will give you a good probability to make profit. Thanks
Thank you, Nick! Glad you found the video to be helpful.
If you buy options with strike prices closer to the stock price, you'll pay more overall for the strangle and therefore have more loss potential. However, you'll also have a higher probability of having the stock price beyond one of the strike prices since they're closer to the stock price.
When buying strangles, there will always be a low probability of profiting substantially from the trade, but the probability is likely to be higher when buying options closer to the stock price.
In short, it's a give and take relationship between probability of making money and premium paid (which is the loss potential).
I hope this helps.
-Chris
Thanks this was easy to take in as you explained.
Thank You Very Much
These are beautiful and very informative charts. Please let me know what charting tool you used. Thanks!
very clear
very well explanation 🎉
Thank you!
So will this be best trades during earnings?
Its too good to understand
Great video Chris. Is the p/l graph from tastyworks? It looks alot simpler to understand than the ones I've seen.
I just put one of these on for the first time on WISH expiration August 27, two days before earnings. The put was up 140% before the close and the announcement (which was bad), we'll see what happens tomorrow.
5:46 is money
What's the difference between a long stangle and a straddle?
Very simple and detailed explanation, have you thought about teaching at university, students could really use someone like you
Possibly! Maybe one day I will be interested in a change of pace like that. Thanks fr the comment!
@totally agree. Thank you for teaching this
Very informative. Quick question lets say u let it expire and ur in the money you will not get assigned? Thank you
If you own the options and you let them expire in-the-money, the options will automatically be exercised and you'll end up with a long or short stock position depending on the type of option you allowed to expire in-the-money.
What if I did a long strangle with long shorts?
Do we need to let these expire worthless or can you close anytime in the green?
You can close options any time as long as the market is open.
Best explanation 👍
Glad you think so!
Just a question, what do you by 100, is that 100 stocks or 100 options
stock shares
This strategy for earnings play is gold.
Can you do this to a bank?
Gentlemen
please throw some light on the following query.
chuck hughes sells a strategy called GROW.
there in i saw in an uptrend nearing end he buys a deep itm call option and then buys an atm put.
the call and put get interlocked.
thereafter any big move upside or downside brings good profit.
question is
does he use delta values to choose call and put or
any other way the call put strikes can be chosen more reliably
please comment
thanks in advance