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Straddle

$AFRM offering up option playsAffirm Holdings $AFRM was up 34% on better than expected earnings and guidance.. the AFRM options market is lively with a steep volatility smile.. depending on your view there’s a number of plays here.. ATM straddle as IV’s there are well below historical volatility.. or bullish call or put spread to sell some rich OTM calls or puts.. after big earnings surprises and moves it can takes the options market a few days to figure out new volatility and therein lies the opportunity..
NASDAQ:AFRM
by Click-Capital
$PLTR looking good for a straddleRetail crowd favourite Palantir $PLTR has recently caught our eye for having low implied volatility and a contraction in recent historical volatility which usually happens before an expansion.. since it has very actively traded options, gamma buildup could easily get this thing swinging big again.. we’re looking at the NOV’19 ATM $26 straddle for a debit of $4.62, we would close at 80% profit or loss of premium, whichever comes first.. over the last year historical volatility has averaged 85%.. current ATM straddle is 50% IV.. 3-Day chart shown above..
NYSE:PLTR
by Click-Capital
Beyond FoMo... Speculation.Beyond Meat is breaking out of a Bull Flag and is at the bullish 50 & 200 day ema crossover point. If the price can break through and stay above the strong 170 resistance area for a couple weeks this could confirm a bullish long term trend. Although there needs to be a considerable increase in volume to make this happen. Watch out for a "Fakeout" above resistance which could have high volatility like on Jan 26th A covered straddle option strategy is useful in a scenario like this when the price could move up or down quickly. The RSI is looking weak, the price could move down after getting rejected at a resistance point and remain in the pennant shape for many more months until it makes its major move out. Make sure to be aware of the overall market conditions while trading and avoid over leveraging in risky setups.
NASDAQ:BYND
by tylerwitucki
4
Option strategy buy Straddle / StrangleIn this post, I will start from the example and then write the definitions. Our example will be on Boeing (BA), a hypothetical analysis might be that BA was trading sideways for more than half a year. Previous to that BA was down in price for more than 50%, also there was a rally of 100% between May and June. The volatility in the markets starting to rise, due to Covid-19, election, lockdowns, blue or red waves, vaccines, other news, etc. The trader expects a large move but doesn’t sure in which direction. Also, the rise in volatility enters into consideration, by our trader. The trader search for a strategy that can be profitable in any direction and a rise in volatility will benefit him. Straddle buying A straddle purchase consists of buying both calls and puts with the same stock, option striking price, and expiration date. The straddle purchase allows the buyer of the options to make large potential profits if the stock moves far enough in either direction. The strategy has a limited loss and theoretically unlimited profit. Buying a straddle should be done on stocks that have the potential to be volatile, this strategy is even more attractive if the options premiums are relatively low, which makes the straddle cost less and if the volatility will rise the buyer will profit much quicker. In general, the probability if held to expiration is near ~40%. Most of the traders don’t wait till expiration. The options are At the money. The example on the chart: Blue lines – profit lines, yellow lines – break-even, red lines – 50% of maximum loss reached. Red zone – in this area the strategy losses money. The options are from 30/10/2020 close in BA. The strategy bought for -> 47.35, meaning a debit is being paid. Stock price-> 144 , Upper strike (call)-> 140, Lower strike (put)-> 140 Days-> 203, Impleid volatility-> 54.4% (0.544), date-> 30/10/2020 The maximum loss is the debit paid for the strategy, in this case, $4735, the chance to lose all of it is less than 1%, the price needs to finish at expiration exactly at the strike price of the options $140, which means all the options will be worthless. If the price will finish exactly at $163.69 a loss of 50% of the debit paid will occur, the puts will be worthless but the calls still have some value, but less value than the debit paid. If the price will finish exactly at $116.33 the trader will also lose 50% from the debit, but now the calls are worthless and the puts have value. If the price will finish between $116.33-$163.69, a loss of 50%-100% from the maximum profit will be realized. The prices of $92.65 and $187.35 represent the prices at which the strategy will break-even. At the lower price, the calls will be worthless and the puts will have value, at the higher price the other way around. Those prices can be calculated: Upper break-even point -> the strike price + the debit paid = 140+47.35=187.35 Lower break-even point -> the strike price - the debit paid = 140-47.35=92.65 The strategy presented on the chart has 147 days, before starting to lose 50% of the maximum loss (Debit paid). If at any point the stock price will reach the dark blue line the strategy will profit $4735 if the light blue line will be reached the profit will be $9470. How implied volatility affects the position? (20% increase and decrease) 20% IV increase -The buyer wants the implied volatility to increase, the strategy will start profit much sooner. The purple zone is the new loss area, the new area is much smaller than the previous one. The break-even lines are much closer to the end date and each other. It will take more time to reach the 50% loss lines 173 days instead of 147 days. 20% IV decrease – If the implied volatility will decrease, the purple loss zone will grow substantially, the break-even lines will go farther from one another and the 50% loss line could be reached much sooner, 63 days instead of 147. Strangle Buying A strangle is a strategy that uses both calls and puts, which have the same expiration date, but different striking prices. The difference between a strangle and a straddle is that the options are now Out of the money, because of that the strangle cost less than the straddle. The example on the new chart: Blue lines – profit lines, yellow lines – break-even, purple lines – 50% of maximum loss reached. Red zone – in this area the strategy losses money. The options are from 30/10/2020 close in BA. The strategy bought for -> 23.95, meaning a debit is being paid. Stock price-> 144 , Upper strike (call)-> 190, Lower strike (put)-> 125 Days-> 203, Impleid volatility-> 54.4% (0.544), date-> 30/10/2020 Those options were chosen because they have a Delta of 0.3 The maximum loss is (-$2395) if the price will be at expiration between the strikes 125-190, the strategy will lose all the debit. (Broken red lines) The other lines are the same concept as the straddle and their outcome is shown on the chart. The break-even point calculation at expiration: Upper break-even point -> the upper strike price + the debit paid = 190+23.95=213.95 Lower break-even point -> the lower strike price - the debit paid = 125-23.95=101.05 The strangle presented on the chart has 101 days, before starting to lose 50% of the maximum loss (Debit paid). The increase and decrease in volatility will have the same effects, thus in the buyer analysis will anticipate an increase in volatility. This post is related to previous posts. You can come back and see what will happen with this particular example. If you have any questions, please ask.
NYSE:BAEducation
by ZoharCho
1
Earnings Straddle Part 4: Legging out. Selling remaining calls.We legged out by selling our remaining calls at the end of the day. We did this because our signal to exit was a red candle close, which was printed, so we sold despite the loss. The buy put cost us around 4-5k. The buy call cost us around 2k. The price variation was a lot greater on the buy put than on the buy calls. Don't know what that was all about, as the strike price was only 5$ away, which is the nearest interval for AMZN stock, and the expiry was the same date.
NASDAQ:AMZN
by emehoke
Earning's Straddle, Part 3/4: Legging out of Straddle.Whether you "put on" the straddle or "leg in" to it, all straddles are legged out of. In this case we offloaded the puts we purchased 2 days ago for a loss, and are now holding the calls in an attempt to let our directionally correct side appreciate. --- I have an issue with this strategy --- The idea is that we are taking advantage of the delta valuation of options. Because options are loaded with time value, and we are trying to capture an abrupt move and take advantage of the ensuing valuative chaos. We are supposed to see more increase in value on our winning side vs decrease in value on our losing side. In this case the opposite occurred. The puts (our losing side) saw a massive change in value going from around -800 to -5000. This is the loss we swallow at the open. The calls (our supposed winning side) went from around -300 to +1,400. This is the exact opposite of what we were looking for. You can see how this could be profitable if the amounts were flipped, but it's very possible the option valuations have evolved to defeat this strategy, leaving the player (me) feeling like I'm working from dusty information. ---End complaint---- In this case the gap and run mentality is successful. The calls are currently appreciation, however, this is a daily strategy, not an hourly one, so what appears to be the saving grace of the strategy, could just as well be a mirage. Obviously, I'm not doing anything so impulsive like exiting the calls now. There is no sense in thinking I'm smarter than the strategy. That's a really self defeating way to go about things. But, for now I'm holding the calls, and I will absolutely be trying this again, and soon, to see if the values can be turned in our favor somehow. -- The final part 4 which will be a recap of the whole thing once the final leg is taken off.
NASDAQ:AMZNEducation
by emehoke
Earnings Straddle. Part 1: Selecting a stock to straddle.Today I have selected Amazon (AMZN) as a good stock to straddle because it is reporting earnings in 3 days (actually 2), it is reporting earnings after market close, it is a highly liquid stock, and it has shown previous volatility during earnings reports in the past. ------------ This will be a 3 part series detailing: 1) Selecting a stock with intention to straddle. 2) Placing straddle orders. (If market conditions hold this will be the simple version known as "putting on" the straddle.) 3) Exiting the straddle. (I will get that reading done sooner than later. Plenty of time to digest and make a post about it.) ------------ Stay tuned for Part 2 coming on Thursday, 4/29.
NASDAQ:AMZN
by emehoke
How CarMax could reach it's estimated 6.5% move into earningsAccording to the option market, KMX is looking to make a 6.5% move based off of $133. This meaning 6.5% to the upside or downside is expected. Due to the current set-up, in my opinion CarMax could reach that 6.5% before earnings rolls out on Thursday. Demand above $134 could trace a realistic move to test $138-$139 by earnings, and has room to even create a healthy shot above $140 before a pullback. $132 downside confirmation is set for current stop loss (current lower-side demand)
NYSE:KMXLong
by rickhubbard10
$NET Earnings Play + How to Trade Earnings In General(Note that I am writing this idea about an hour after market open when $NET is trading around $90) Thought I would publish a quick idea on how I like to select and play earnings on stocks. $NET looks like a decent candidate as an example and actual trade. Earnings reports represent an opportunity for a BIG move, but we just don't know WHICH direction. Many newer options traders like to buy single-legged options (calls or puts) at very near expirations to express a hunch or opinion on direction. The options appear cheap with HUGE payouts if you hit a home run. But those are overwhelmingly losing trades, even when you get the direction right. Why? Implied Volatility (IV) gets absolutely JUICED for earnings plays. For example, suppose I am bullish on $NET earnings and want to buy a call- Buying the ATM $90 Call for 2/12 expiration means $NET needs to move up to $95 just to breakeven, and about $100 to give you about a 1:1 reward to your risk ($520 profit to your $520 debit paid) Buying an OTM $100 Call for 2/12: breakeven is at $102, $104 is 1:1 R:R If you think going out to the next further expiration is better, it's not. The 2/19 expiry on those same strikes produces similar price points to breakeven and 1:1 profit ATM Call for next week's expiration OTM Call for next week's expiration To some that trade might not look that bad, but what is not shown on these charts (generated from theoretical calculators) is the impact of IV Crush . If we close today at $90, ER happens after today's close, and we open tomorrow around, say, $95, and close around $93, those calls are going to lose most of their value . The reason for this is people paid(really, over-paying) for a big move that did not seem to come. Most earnings have their biggest moves AT earnings, not a week after. The momentum is largely lost. Impact of Implied Volatility, IV Curve, Implied vs Actual moves for previous earnings Unless you have a crystal ball for direction, you generally want to buy or sell volatility based upon the expected magnitude of event What this means is if currently the IV is sky-high up front and absolutely plummets in the months afterwards, you look to see what previous moves did vs what their implied moves did. I look at MarketChameleon.com for this. If the actual move of the last 12 earnings as well as the average move is about equal to or less than the implied move was, generally people are over-estimating the magnitude of the move The IV Curve/term structure gives you an excellent opportunity to buy or sell volatility on one term relative to another. If IV has been climbing and looks like its cooling off, you sell it. If IV looks like its been calm and is starting to climb up, you buy it. This is explained best buy buying a straddle at one term and selling a straddle at another. More common term structure. Implied Volatility is relaxed but expected to rise -sometime- in the future. Term structure you get with most earnings events or when Reddit wallstreetbets gets obsessed with a stock. What are 'IV30', 'IV60', etc? Options are instruments of TIME Because they are instruments of time, we are always looking at the price of something relative to the future, and the future is generally different Options Expirations (OPEX) dates, usually the monthlies. For stocks they are very interested in OPEX dates occurring around special events like an earnings report, dividend, or some kind of conference, results of a trial, economic event, and etc. Generally options markets are looking ahead at intervals of about 30 days. You see this with CBOE's $VIX index, which tries its best to reflect the outlook 30 days from now (Per CBOE FAQ on VIX: "Only SPX options with more than 23 days and less than 37 days to the Friday SPX expiration are used to calculate the VIX Index. These SPX options are then weighted to yield a constant maturity 30-day measure of the expected volatility of the S&P 500 Index.") Here's how I am playing Cloudflare $NET earnings- Sell a straddle for next Friday (surprise surprise). Tomorrow's expiration is absolutely jacked on IV juice, but it is a little TOO near for my liking. What if NET moves up to close at $110 tomorrow, but if I had just one more week it could've settled closer to $100 and made me a profit? Tomorrow's expiration IV is 170, which is about 40% more than next Friday's 120, and will surely get crushed extremely hard if it doesn't produce a good move, but I get 30% more premium selling next week's expiration (2/19), and that one will also plunge if there's a non-move We buy a straddle at a further out expiration, one where the IV is far lower The idea here is that we are mostly playing Theta/time. The hope is that if the stock doesn't move much the value of the near-term straddle sold goes down significantly, while the far-term we bought goes down, but not as harshly. There's also potential for the IV curve to balance out so that the near-term lowers a bit while the far-term rises a bit, giving value to our long straddle while leeching the near-term straddle we sold Here are some guidelines playing with Double Diagonals/Calendars- Set a limit buy on the option you sold to buy it at $0.05, Good Till Closed. If you're short on an option and its basically lost all that value, take your risk off the board for a measly 20-something dollars. Who knows if you celebrate early and then a massive move happens, you could have just eliminated that risk potential (Remember to close your long one as well, or replace the short you closed with a new one) I like to close the spread before expiry and not allow an ITM option to be exercised. That adds another dimension of complications most are not ready to deal with Consider rollouts. If you sell the 2/12 or 2/19 and we get a nothingburger, most of the crush has probably happened by tomorrow's open. You buyback (Buy to Close) your $90 call and put and now sell (Sell to Open) a later expiration date, like the 2/26 or even the 3/19 (if you did a diagonal, this would make it an Iron Butterfly, if you did not you cannot sell the $90s since you are already long, you'll have to roll those out) In the rollout scenario, it is sometimes pretty ideal to have your long straddle be at a much further out date because you can rollout your short straddle several times I find that generally you are much more protected on big moves to the upside, less so to ones on the downside. This is related to a number of things like Implied Volatility, Skew, etc, but it's not a bad idea to place your straddle a bit lower rather than higher. Look at your Theoretical Options Calculator and see what is the most likely scenario Good luck and happy trading. Please let me know if you have any questions, comments, etc. I am always learning and am susceptible to writing something incorrectly or even having a misunderstanding of things :)
NYSE:NET
by chrism665
11
BTC From Here - The "Wheel"How I will attempt to straddle BTC using the "wheel" and come out laughing while it rounds a cup, or crashes back to a 50% retrace. This is an attentive strategy and hardly passive requiring a bit of sweat. Basically I am willing to risk all the funds I lay down here to liquidation. Binance offers two products, the USDT and BTC inverse futures perpetual. This is the "wheel": a) only long with the BTC asset inverse perp and only short with the USDT asset perp. b) enter and exit your positions on a grid and ensure you have deep enough pockets to entry ratio to make it to a reasonable safety.. Increase entry size with distance from position price to current price to drop your position price faster than average. Today I will be using 37x leverage and minimum entry with a slight doubling down played by ear. Reasonable long safety is 22879 and short would be high 35k up to ATH I'm already half motion with my wheel so I will give this as a starting example. Start straddlin'
by Benjamix
Option strategy sell Strangle/Straddle In the chart, you see the strangle strategy when sold, I will show what will happen if the implied volatility changes, you can see this strategy being bought in the next post. You can come back to this post and watch how things play out. As a rule of thumb, strategies are sold when implied volatility is relatively high and bought when implied volatility is relatively low, the seller would try to anticipate IV decrease and the buyer would try to anticipate IV increase. Selling Strangle The strangle is a position involving calls and puts, they will have the same expiration date but different strike prices. Selling Strangle is established by selling Out of the money calls and puts when the stock price is usually in the center. This strategy when selling a strangle is neutral, the seller anticipates that in the life of the options the stock price will remain between the strikes, and at expiration, the options will be worthless and the seller will receive all the credit. The green zone is the profit zone, the yellow lines are the break-even lines, the blue lines are losing lines, the lime green lines represent when you can realize 50% of the credit. I added pink broken lines to show where this strategy will have the maximum profit at expiration. For example, from the chart, these options are from 29/10/2020 close in Zoom. The strategy sold for -> 44.6, meaning credit is received. Stock price-> 489.68 , Upper strike (call)-> 600, Lower strike (put)-> 400 Days-> 50, Impleid volatility-> 82% (0.82), date-> 29/10/2020 For one position we received 44.6, multiplying by 100 (number of shares per contract) if the stock price will be between 400 to 600 at the expiration date , all the options will expire worthless, the seller will receive all the credit $4460 this is the maximum profit. Upper break-even point at expiration: The upper strike + credit received = 600+44.6 = 644.6 Lower break-even point at expiration: The lower strike - credit received = 400-44.6 = 355.4 Between 600-644.6 and 355.4-400, one of the options is not worthless at expiration, so it has intrinsic value, the seller will get between $0-$4460, the seller will need to close the position before expiration to avoid assignment. If the price got to 689.2 or 310.8, the position is losing, in this case (-$4460), this strategy has a limited profit and theoretically unlimited loss. You can see from the chart that It will take at least 22 days to realize 50% of the credit, some traders don’t want to wait until expiration and they prefer to close the position at 50% credit. How implied volatility affects the position? (20% increase and decrease) The blue area is the new profit zone, the purple lines are the new losing lines. If the IV will raise after entering the trade (left chart), the seller will need to wait 18 days before his position will re-enter the profit zone, what was before a profit area will now be a losing area. On the other hand, if the IV will fall (right chart), the seller will profit much quicker, the losing lines will be farther away. Selling Straddle This strategy is a private case to the strangle (the general strategy), in the straddle both options the calls and puts are at the same strike price, usually At the money. The strategy is sold at the money because the time premium is the largest there. This means that the seller receives a lot more credit for this strategy, the downside is for getting the maximum profit the stock price needs to finish exactly at the strike price, the probability for this to happen is less than 1%. The opportunity to realize 50% of the maximum profit will take longer than the strangle, in this example 39 days. The break-even lines will be much closer. The maximum profit for this example is $11,690, much larger than the strangle. The risks are also much larger. How implied volatility affects the position? (20% increase and decrease) The selling of the strangle and straddle are not for beginner traders, due to the risk involved, a less risker strategy is the Iron Condor . In the next post, I will show the buying side of the strategies.
NASDAQ:ZMEducation
by ZoharCho
3
Disney - Straddles going into Earnings? Hey Traders! Disney is reporting earnings today after market close. There really isn't much technical analysis can do to determine what outcome the report will have on the stock price. But I will say this... Disney's stock showed decent price appreciation in the last two and a half weeks going from lows of $117.23 per share to highs of $147.68 per share. Although Disney is off it's highs, the current trading price of Disney's stock is $135, which is still above its 8 day exponential moving average. Whether Disney meets, beats, or misses analysts estimates for this quarter's EPS and Revenue, the option prices are a big move for Disney. A look at the "At The Money" straddles (at the 135 Strike, expiring tomorrow) show they are trading for nearly $600 . Which means Disney would need to move up or down by $6.00 per share just to break even. Right? But wait... Keep in mind that option prices are also made up of premium.. which consists of time value and implied volatility. Implied Volatility is considered a measurement of the perceived risk for an individual option contract. That risk is then priced into that option as a premium. Usually, implied volatility is at its highest before anticipated earnings reports or company news announcements. The day after the news is made public, implied volatility usually drops, which can drastically lower options prices. In reality, you would need more than a $6.00 per share move in Disney stock considering. I say this because there is nothing more frustrating than seeing you were right on the expected move, but lost money on the option because you forgot to consider the effects of implied volatility. Now, grab your favorite drink, sit back and watch Disney's stock after the bell as they are expected to report 5 minutes after market close. REMEMBER: Reference to specific securities should not be construed as a recommendation to buy, sell or hold that security. Specific securities are mentioned for educational and informational purposes only. YouCanTrade is an online media publication service which provides investment educational content, ideas and demonstrations, and does not provide investment or trading advice, research or recommendations.
NYSE:DIS
by UnknownUnicorn6775423
TSLA - UP or DOWN?If there's one stock I had to name for being the most unpredictable, it's TESLA ( NASDAQ:TSLA ). This rather volatile stock is expected to have some pretty big moves going into market close today as the company will be holding their annual shareholder meeting at 4:30 p.m. ET. ...But wait...there's more! Once the meeting is over, the company will immediately follow up with their highly anticipated Battery Day event, which will be used to show those in attendance what's new with TSLA batteries and what improvements could be coming to make their batteries more energy efficient. So what does this mean for the stock? Well, for one, TSLA is a volatile stock, so major events like these... only increase implied volatility since everyone is expecting a big move either up or down. Second, The stock is trading dead smack in the middle between its recent highs and lows... the lows being most recent of the two. So, taking advantage of volatility is the way to go. Options traders can benefit from inflated options prices due to higher implied volatility by being option sellers. Strategies like Short Iron Condors, feature both, a capped risk and reward profile. Setting your strike selections near the recent highs and lows could be one way to trade TSLA... but the problem is that the inner strike are so wide making the risk to reward ratio very high. You can also sell credit spreads. To trade directionally, means to either go long calls or puts... Since Volatility is high, these strategies tend to be more expensive near major announcements. If you nail it, good for you. If you dont, then know that you can't lose more than what you paid for. If you still want to trade directionally, but want to minimize the risk, you can do debit spreads. This involves buying an option which will serve as your directional trade, and then selling that same type of option a few strikes further away to bring in some credit. This option might be good if you think that implied volatility will only increase after the announcement. Usually, the day following a major events, as with earnings announcements, options have been known to experience "volatility crush," in which the implied volatility drops after the news announcement. A drop in implied volatility can affect an option's price even more so than the movement of the underlying stock price. Therefore, directional neutral trades such a long straddles, will need to have a large move in the underlying in either direction to outpace the potential drops in implied volatility the next day. Which strategy will you choose? Remember...choosing not to trade can also be a wise trading strategy.
NASDAQ:TSLA
by UnknownUnicorn6775423
2
Jet Blue (JBLU): Drastic price movement imminent?Looks like a descending triangle forming or at the least, a symmetrical triangle. If Descending Triangle: - There will be rapid price drop. If Symmetrical: - In a vacuum, the price would experience a significant movement (up OR down). All things considered, it'll be interesting to see how fast this pops (implodes). I entered a straddle play at $8 Jun 19. Now watch it go sideways instead LOL. Let me know what you think of this idea.
NASDAQ:JBLU
by traderman001
BTCMOVE: Scalp long volatility Market is boring, bitcoin doesn't move, so, on the one hand I can only wait for some movement and react to it after, but on the other hand I can react on the waiting of the movement itself (or no movement), i.e long / short volatility. I think there should be some kind of strong movement soon, so I've decided to long BTCMOVEWK0501 contract (straddle) on FTX with strike at $7483. Hope to catch 10% movement, invalidation - falling 4-5% below, I follow the position closely. Hit the "LIKE" button and follow to support, thank you. Information is just for educational purposes, never financial advice. Always do your own research.
BLong
by Bitduke