VIDEO: 3:19 MINUTES
This session continues to define various trade strategies:
This session continues to define various trade strategies:
- Short Straddle
Short Straddle
- Type: Credit
- We SELL the options (pay the premiums)
- Implied Volatility: High – 80% or more
- Direction Bias: Neutral/Range Bound
- Volatility Bias: Aggressive Short Volatility (ASV)
- Risk/Reward Profile:
Max Risk: Unlimited (short call side has unlimited maximum loss. Short put side is limited to the cost of ownership of the underlying at the strike price)
Max Profit: Limited to Net Credit (credit received from the short units) - Greek Values:
- Position Delta: Neutral (close to zero as possible)
- Position Vega: Negative (Maximum short Vega)
- Position Theta: Positive
- Position Delta: Neutral (close to zero as possible)
- Position construction: Between Zones (underlying is in the middle of a range)
Sell 1 ATM Call with expiration as short as possible always less than 60 days
Sell 1 ATM Put with expiration as short as possible always less than 60 days - Best Case Market Condition: Great strategy when used with proper implied volatility (the higher the better). The closer the underlying price is to the strikes at the time of expiration the more the position will profit. Captures profit from range bound price activity but while in high volatility
