I have been dabbling in Options the last year or so, just buying a few Calls and Puts ... with some success. I went to one of those Optionetics seminars the other day (don't worry.. I haven't 'signed up') but went away thinking about the Long Straddle concept. The strategy I was thinking of developing runs along these lines :
- Analyse market fundamentals to look for stocks that are are either volatile and moving already, or look likely to have a trigger event (eg: reporting season, announcements) in the near future.
- Set up a straddle around the current market price.
- Let it run for a few weeks, and especially over any 'trigger event' that is anticipated.
- If it moves significantly, then well and good. If not, then close out the Options before the theta-effect takes hold to minimise loss.
The downside I see with this strategy is that stocks generally need to move A LOT in a short period of time for a real profit to be made, often in the vicinity of 15-25% of the value. Would this be a fair statement, to the point that a strategy of working straddles is unlikely to deliver any real profit when treated in an across the board fashion? The bloke at the Optionetics seminar seemed to indicate that the Straddle would deliver a good profit often enough to significantly outweigh small losses, but I am not entirely convinced of this as yet?
Finally, I would have to ask your advice as to whether this strategy is a good, minimal risk way to learn the discipline and analysis techniques required to trade options successfully (using other strategies?
Anyway, I look forward to hearing peoples view and experience on this approach?