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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 📈
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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 📈
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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.
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The buyer is paying you this amount for the day.
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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:
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Let’s have a look at the greeks of our position:
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