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Straddles with weekly options

Discussion in 'Derivatives' started by mjim, Sep 12, 2016.

  1. mjim

    mjim Well-Known Member

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    Does anybody do straddles with weekly Options ?
    - Total cost is less than a monthly but it also means lot less time for the underlying to move in one direction
    - What indicator one can use to back test and see the trading range of the underlying to see if it moves sufficiently in a week?
     
  2. minwa

    minwa Well-Known Offender

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    Are you proposing a strategy to buy every week ? I don't think it will work, market conditions change - but don't take my word for it..do your own studies.

    You do not need any indicator. Simply use the price of the underlying.
     
  3. mjim

    mjim Well-Known Member

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    Yes buy a straddle made up of weekly options perhaps with 3 days left to expiary
    For example
    ES as underlying futures and weekly Es options may be costing 5points x50 x2 = $500 so the Es needs to move more than 10 points in either direction !
    Or Options on CL futures assuming it moves sufficiently on Wed announcement!
     
  4. Virge666

    Virge666 Active Member

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    There is a lot of Gamma risk with holding to expiration. You almost turn it into a binary event, not quite, but close.

    I like a Calendar or a condor/iron fly at the other end. So buy on the Thursday/Friday and close on the Tuesday or wednesday... more of a chance to pull out 10-20% consistently.

    Your way may indeed work - but if you get a 1-1.5 SD move and you have you hat in your hands. Like last Friday . . . When you trade a bit further out - you still get the occurrences, but you just get that much more time to adjust or get out.

    Lastly - assignment risk is an issue with holding them...
     
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