Straddle me this

• 31 July 2007

• #1

R

rapidex

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Straddles seem to good too be true, but maybe I'm missing something?

It seems all you need do is find a trending stock and place an ATM straddle out for 6+ months?

Anyone use alot of straddles?

Of course, it's a double debit to open, so bid and offer are crucial, but it seems like they could be very profitable.

Mind you, I'm paper trading them at the moment and haven't placed any in the real market.

Any comments - thanks.

 

• 31 July 2007

• #2

A

Awesomandy

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rapidex said:

It seems all you need do is find a trending stock and place an ATM straddle out for 6+ months?

Click to expand...

And if the stock then trades within a range for the next 6 months, that's a lot of money you've lost. It's a high risk, high gain strategy.

 

• 31 July 2007

• #3

wayneL

VIVA LA LIBERTAD, CARAJO!

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Watch the vols too.

 

• 31 July 2007

• #4

Mofra

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Straddles are as close to the purest of the IV plays you can get IMO. At least with a long straddle your max loss is known up front, but you'd want a clear history of IV action & some pretty clear contingencies prior to entry.

Cheers & goodhunting