You can look at a short strangle, which, if you're nimble in a
volatile market, you can both leg into and out of, with high
volatility giving you higher credits to collect. My experience is
that covering at 50% profits is the right combination of being able
to recycle capital without being too greedy. People tend to get
hurt in options most: a) when they only buy them; b) when they hold
out for too much.
A short strangle can work as well - putting it on a once &
covering each side when the market moves in both directions - but
that is a harder play in my experience.
Yes...the 2nd. The probability of profit is lower when you buy
either a straddle or a strangle (than in selling either of the same
strikes), but much, much lower when you buy a far out-of-the-money
strangle. The probabilities are knowable at any given time and are
highly valuable in trade selection.
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You can look at a
SPY, NFLX short starting to work. GDX long inv h/s ...
Posted by a_l_ on 30th of Jan 2015 at 12:59 pm
You can look at a short strangle, which, if you're nimble in a volatile market, you can both leg into and out of, with high volatility giving you higher credits to collect. My experience is that covering at 50% profits is the right combination of being able to recycle capital without being too greedy. People tend to get hurt in options most: a) when they only buy them; b) when they hold out for too much.
A short strangle can work as well - putting it on a once & covering each side when the market moves in both directions - but that is a harder play in my experience.
thanks, a_i! I think you
Posted by frtaylor on 30th of Jan 2015 at 04:04 pm
thanks, a_i! I think you meant straddle for one of those two trades, yes?
Yes...the 2nd. The probability of
Posted by a_l_ on 31st of Jan 2015 at 08:39 pm
Yes...the 2nd. The probability of profit is lower when you buy either a straddle or a strangle (than in selling either of the same strikes), but much, much lower when you buy a far out-of-the-money strangle. The probabilities are knowable at any given time and are highly valuable in trade selection.