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🧵 #AlgoTestExplains (#2) : How do you trade the short straddle?
In this week's edition of our new series, we're going to be talking about how the short straddle can be deployed to make money WITH and WITHOUT delta hedging 📈
1/15
In this week's edition of our new series, we're going to be talking about how the short straddle can be deployed to make money WITH and WITHOUT delta hedging 📈
1/15
Firstly, the intraday theta when selling options can be thought of as your compensation for the asymmetric risk that you’re taking on when selling a straddle.
The buyer is paying you this amount for the day.
2/15
The buyer is paying you this amount for the day.
2/15
The maximum profit for the trade is limited to the max theta for that particular day, everything else remaining the same.
Let’s have a look at the greeks of our position:
3/15
Let’s have a look at the greeks of our position:
3/15
🧵 #AlgoTestExplains : How Does a Long Straddle Make Money?
Here's a new series wherein we dissect trading strategies, concepts & more via threads 📈
For our pilot thread, we will discuss how one can profit off of intraday long straddles.
1/13
Here's a new series wherein we dissect trading strategies, concepts & more via threads 📈
For our pilot thread, we will discuss how one can profit off of intraday long straddles.
1/13
A long straddle comprises buying a put (PE) & call (CE) of the same underlying, strike and expiry.
The price you pay to trade a long straddle intraday is the net theta for that day.
Let's take a look at the greeks of such a position.
2/13
The price you pay to trade a long straddle intraday is the net theta for that day.
Let's take a look at the greeks of such a position.
2/13
Greeks:
Delta = 0 (+0.5 CE, -0.5PE means we're delta neutral)
Gamma = +ve (movements in underlying are *usually* good for us)
Vega = +ve (increase in implied volatility is good for us)
Theta = -ve (time passing without much action is bad for us)
3/13
Delta = 0 (+0.5 CE, -0.5PE means we're delta neutral)
Gamma = +ve (movements in underlying are *usually* good for us)
Vega = +ve (increase in implied volatility is good for us)
Theta = -ve (time passing without much action is bad for us)
3/13
