Long Straddle Option Strategy

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http://optionalpha.com – How to set up and trade the Long Straddle Option Strategy

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Comments

Hunter Kopp says:

Check out this video on YouTube:

Kyle Hoopes says:

So if the stock made a large upwards gain, which subsequently makes the call option feasible to exercise or trade, you still have to compensate from the loss of premium from the put that you placed? If I am not mistaken, at the money options have low intrinsic value and decreasing time value dependent how close you're to expiration. The only time I would use this strategy is when news comes out or if intra weekly volatility is projected high, but again it's probably priced in the premium. 

Moe Khan says:

Hi there, the premium you mention for finding breakeven is the sum of the premium paid for puts and calls, right? so, net permium must be a better term.

tengscredible says:

Correct me if I am wrong, on your example, if the market moves to 50, how can we exit? Are we suppose to add to the break even the loss of the other option (downside)? Also, if we exit on 50 on one option, do we exit the other option too, or just wait for to expire?

Option Alpha says:

Either a long or short strangle depending on where the volatility was at the time.

tim Henderson says:

Thanks it was very helpful , to me this is a free lesson .
I appreciate that .
Yhanks

tim Henderson says:

Thanks man , I new that I would profitable to do staddle on some stocks like expedia 30 percent drop but I didn't know which direction it was going , now finally I know what it means . Good luck to you

superduperboyx says:

How about hedging against straddles? When you anticipate a large upward or downward movement, and it didn't happen both positions are down 50-85%, what ways can you hedge against it to lessen the pain? I've seen stocks after earning where its just up or down barely 1-2% and nothing happens to the straddle positions.

Option Alpha says:

In that case you buy the closest expiration month out.

superduperboyx says:

Hey Kirk, hope you answer comment questions — How do you select the date of the options? Say I want to buy around the time of earnings, ABC stock's earning is on 7/14/13, what implications will make me decide to either buy the straddle expiring in July, or Aug, or Sept, etc ? What about OUT the money options, do you suggest leap month strangles ?

kcrone1 says:

Kirk but a straddle doesn't need to move as much as a strangle to become profitable?

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