Discover and read the best of Twitter Threads about #strangles
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#Strangles A little note on getting into strangles in a bear market scenario
If you're an intra-day trader selling delta-neutral strangles on non-expiry days in the morning and holding them till day end then be careful of the following when market is expected to be bearish.
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If you're an intra-day trader selling delta-neutral strangles on non-expiry days in the morning and holding them till day end then be careful of the following when market is expected to be bearish.
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Given short strangles are short vol trades (-ve vega) the view is not just on benefitting from theta but more importantly on vols going down during the day. So in a bearish scenario when vols are expected to go up with market going down your strangle position
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will get affected in the following way:
- Loss due to vols going up with this being a -ve vega position. There are other vol factors that you'll be short on such as skew (below), convexity of the vol surface and these increase as well affecting the position negatively.
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- Loss due to vols going up with this being a -ve vega position. There are other vol factors that you'll be short on such as skew (below), convexity of the vol surface and these increase as well affecting the position negatively.
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#Straddles vs #Strangles ( Sell only )
These are the most common #Options strategies when one would start with #OptionsTrading.
Let’s understand from a broader perspective what’s the difference between these two.
These are the most common #Options strategies when one would start with #OptionsTrading.
Let’s understand from a broader perspective what’s the difference between these two.
Would not like to discuss the construction difference between them if you don’t know stop trading #options
#Straddles
You get higher premium so pnl would be higher compared to #strangles
But from where are you getting higher premiums is that your selling 0.5 #delta.
#Straddles
You get higher premium so pnl would be higher compared to #strangles
But from where are you getting higher premiums is that your selling 0.5 #delta.
So probability of one going wrong is always 50% so to simply put one side is goin to get stuck in a #straddle but then market tends to #flucuate a lot so there is always the case of #meanreversion if you have selected the #strike rightly.
Theoretically, #VIX and Implied Volatility tends to go down with a rising #Nifty in case when there is no known event. Nowadays there are many #traders writing #options #strangles etc. I doubt many have seen the 2010 move or 2009 election day.
#Nifty went up from 5600 to 6000 + in 2-3 weeks and #VIX went up from 16 to 24. #IVs for #OTMs would have gone bonkers in Sept 2010. #Nifty #Options #Strangles. If somebody can put up actual price moves of #Option #Strikes 
forbesindia.com/article/boardr… The Mumbai-headquartered Aditya Birla Money had lost Rs. 103 crore on its Options Maxima strategy. A lot of other prop desks got hurt real bad... Disclosure - Not targetted against anyone. #NotTrolling
