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Straddle

Covered Straddle on TT stock has earnings July 25 after the bell and the current implied volatility is inflated. Can current stock owners profit from selling premium before earnings? What if the investor is willing to acquire more shares if the stock falls to the put strike and willing to sell shares held if the stock price rises to the call strike? Last price of of 36.52 Implied Volatility is 20.9 28 Days to Aug 18 Expiry 1 Standard Deviation range 34.4 - 38.64 which implies an expected range of +/- 5.79% by expiry. The current stock price is right in between the straddle strikes so you'd need to choose depending on if you're bullish or bearish on the stock currently. The 37 straddle credit is $1.57 or 4.3% of last price for break even at 35.43 and 38.57. The 36 straddle credit is $1.63 or 4.46% of last price for break even at 34.37 and 37.63. An advantage to selling the straddle is right now the $37 strike volume is higher and more liquid. A disadvantage to selling the straddle is the narrower breakevens and lower probability that the stock price is between the breakevens by expiry (about 50%). The straddle can however be managed early at 25% of the initial credit for a higher probability of success. The 34-39 strangle (about 12 delta) gives a credit of 25c (a paltry 0.68% of last price) for breakevens of 33.75 and 39.25. This is outside the range of the expected move. The 35-38 strangle (about 22 delta) gives a credit of 53c (1.45% on the a T price of 36.52) for breakevens of 34.75 and 38.53. This is just inside the range of the expected move. The 20 delta strangle credit would yield an annual rate of 12%+ if sold 8 times a year. An advantage to selling the strangle is the wider breakevens and higher probability of success that the stock price is between strikes by expiry and the investor keeps the whole credit. More info on the covered straddle strategy: www.fidelity.com
NYSE:T
by dime
Brazil went down big, let's sell premium (Big lizard)After some negative news about bribery in the government the Brazil's ETF (EWZ) got killed at the open with a 18% down move. With the Implied volatility rank of the stock at the high's of the last 52 weeks(100%) it means that buying options is going to be expensive, in other words we are going to be selling overpriced options. Betting that this is an over reaction and wanting to take as much credit as possible, I decided to sold a big lizard (Straddle with no upside risk) to get a nice premium. The trade: 64 days to expiration Sold the 33 Calls Sold the 33 Puts Buy the 36.5 Calls (no upside risk) Collected 3.95 per contract Target price will be at 25%
AMEX:EWZ
by AlexanderGotay
RDSA Short Straddle brings in significant yieldThe current dividend yield on Royal Dutch Shell is 7.22% - Some of the highest yields out there. Combining this with a similar yield on the 7% OTM put, and topping it off with additional income from selling an OTM call, brings in an exceptional annualized yield in excess of 15%. The risk is to be long an oil asset in an uncertain oil environment. However, this is mitigated by the blue chip status of the exploration giant, as well as the over-sized dividend yield. I size the trade to the minimum options contract size (100 shares), but any multiple of that would work. I use actual prices from a trade just effected for a client. STRATEGY 1. Buy 100 shares of RDSA at 23.80 Euros/share 2. Sell 1 RDSA 15JUN18 E22 PUT at 1.52 Euros/share 3. Sell 1 RDSA 15JUN18 E26 CALL at 0.48 Euros/share INCOME 1. Options premium cashed in at maturity = 1.52 + 0.48 = 2.00 Euros/share 2. Indicative annual dividend to be cashed in = 1.72 Euros/share 3. Total cashed in annually = 2.00 + 1.72 = 3.72 Euros/share YIELD 1. Yield from options premium = 2.00/23.80 = 8.40% 2. Yield from dividend = 1.72/23.80 = 7.22% 3. Total income yield = 15.62% OTHER This strategy is also available in USD and GBP. If the stock goes down to the strike level and the shares are assigned to the investor, one would end up being long RDSA at a net price of 20.90 Euros/share (purchase price of the shares, less income from options and dividends in the first year) which is some 13% below the current price. On the up side, assuming the shares reach the call strike and the investor is assigned and delivers the shares at 26.00, the profitability of the strategy would be 9.25% excluding any accrued dividends at the time of assignment, and excluding the accrued value of the options premia at the time of assignment.
R
by HAL9000
1
Neutral trade on EFA (Laddered Straddles)I didn't have any positions on EFA and With IV Rank at 47, I wanted to sell some premium. We are out of the ideal 45 days expiration window and since my portfolio theta is pretty low right now I decided to do laddered straddles. Selling the 62 Straddle with 32 days to expiration and another one with 60 days to expiration. This will give us an avg date of expiration of 46. I got a total of $526 in credit. This is close to a 50% chance trade, but I will look to take profit early to increase my probabilities.
AMEX:EFA
by AlexanderGotay
VIX IronFly for a neutral bet on volatilityAfter a a little upside on the VIX we got another fast contraction in volatility. Got the idea from the guys at tastytrade and I liked the trade. This is a neutral bet on the VIX and we make money if it stays between 15.50 and 11.50. Sold the 13.5 Straddle and bought the 17 Call and 10 Put wings to make an Iron fly for a $2 credit per contract and reducing our buying power requirements. I will look to manage these very early at 10% of the credit received. Backtest data done by tastytrade 2006 to present managed at 10% of the credit received had a 89% Success Rate
TVC:VIX
by AlexanderGotay
AUDUSD StraddleNo crystal ball here. I'm not going to pretend like I know where this is going to go. However, I am hoping to get a position activated that give me profit a few days to many days down the road. Whichever way AUDUSD decides to go, I want to be on it! AUDUSD qualified for an entry by having 1) consistently low spread (this is important because of stop loss placement), 2) previous daily range of less than 100 pips, and 3) due to the shape of daily candle that formed previously. My assumption is: the range has been compressed enough to cause contract "coiling" and that a small stop hunt will be performed up to the previous daily high and then drop. If this does not happen, stop losses have been placed to mitigate a deviation from the plan. I have a sell limit of 0.13 lots at 0.75075 with a 10 pip stop at 0.75175 (risk = 1/4 of 1% ($12.50)), and an expiry of 10 minutes before London close. I also have a buy limit of 0.13 lots at 0.74481 with a 10 pip stop at 0.74381 (risk = 1/4 of 1% ($12.50)), and an expiry of 10 minutes before London close. No take profit targets are set with these trades for now. I want to ride them out to stop loss or until I choose to close them.
by BACapitalManagement
Low Power Mode. Back to the charge station.TSLA stock is at a crossroad and maybe hard to admit that its lost in direction and headed back down for a recharge. I do see the potential for this stock to rebound if it does drop. Longer term, aside from all negative headlines TSLA is a threat to the old standard traditional car makers, dealers, auto mechanic. Its also a threat to indirect markets such as insurance, law enforcement, legal counseling, utility companies and probably much more. Its no wonder why TSLA is scrutinized heavily. It is such a threat that lazy traditional vehicle manufactures like F, GM, BMW, and others are FINALLY producing copycat EVehicles. But TSLA is thinking way head and if you don't understand why the SCTY deal makes sense, then, your probably still banging your head against the wall holding onto zombie industries. This is the economy of "Creative Destruction", where old labor is replaced by new and younger tech workforce, where some jobs and careers are replaced with technology.
NASDAQ:TSLAShort
by TraderMD
2