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    Adjusting Straddles and Strangles

    Uploaded by

    Ravindra Simpi
    Options Strategy

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Adjusting Straddles and Strangles

    Uploaded by

    Ravindra Simpi
    895 views7 pages
    Options Strategy

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

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    Options Strategy

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    895 views7 pages

    Adjusting Straddles and Strangles

    Uploaded by

    Ravindra Simpi
    Options Strategy

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7
    At a glance
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    The key takeaways are strategies for adjusting straddle and strangle positions when the underlying stock price moves into a stagnant trend.

    Some ways to adjust include picking one side of the trade and adding a short option, selling the other side, or keeping both sides and creating calendar spreads for each.

    Exercising patience allows the stock to potentially pick a direction and avoids closing positions at a loss prematurely.

    Module 6.

    5
    Adjusting Straddles and Strangles

    Adjusting Straddles and Strangles

    This class is a production of Safe Option Strategies © and the content is protected by
    copyright. Any reproduction or redistribution of this or any Safe Option Strategies ©
    presentation is strictly prohibited by law.
    The information presented in this class is for education purposes only. Safe Option
    Strategies © does not make any recommendation to buy or sell stocks or options.
    Trading stocks and options comes with risk and you are solely responsible for any
    losses you may incur as a result of trading.
    Module 6.5
    Adjusting Straddles and Strangles
    Review of The Straddle/Strangle
    Debit Spread
    Buy to Open the Trade
    Long Call is Placed At or Just Out of the Money and Typically 90 Days or Longer to
    Expiration.
    Long Put is Placed at the Same Strike Price (Straddle) or at a Lower Strike Price (Strangle) in
    the Same Month of Expiration.
    There is Not a Primary and Secondary Option in This Trade Unless There is a Very Bullish or
    Very Bearish Expectation.
    Cost Basis or Net Debit of the Trade is the Debit of the Long Call Plus the Debit of the Long
    Put.
    Max Risk = Cost Basis
    Max Reward = Unlimited Minus the Cost Basis to the Bullish Side; The Long Put Strike Price
    Minus the Cost Basis to the Bearish Side.
    Good Target ROI is 20-30%
    Good Target Time in the Trade is Under 8 weeks. Less Time is Better Due to Time Decay.
    Module 6.5
    Adjusting Straddles and Strangles
    Adjustment for Stagnant Trend  Open the Trade Expecting
    Strong Movement
     Stock price moves into a
    stagnant trend.
     We should pick a side.
     Sell to close the option we
    don’t pick.
     Add short option to the side we
    LC LP pick, at a earlier expiration date
    SP creating a calendar spread.
    Module 6.5
    Adjusting Straddles and Strangles

    SP LC LP

    SP
    Module 6.5
    Adjusting Straddles and Strangles
    Adjustment for Stagnant Trend  Open the Trade Expecting
    Strong Movement
     Stock price moves into a
    stagnant trend.
     We could keep both sides.
     Sell to open short calls and
    manage the call side as a
    SC LC calendar spread.
     Sell to open short puts and
    SP LP
    manage the put side as a
    calendar spread.
     Manage each side as a
    completely separate trade.
    Module 6.5
    Adjusting Straddles and Strangles

    SC LC

    SP

    LP
    Module 6.5
    Adjusting Straddles and Strangles

    Summary
    1. When the stock in a straddle or strangle moves stagnant, we can:
    1. Pick one side of the trade and add short options creating a calendar spread.
    2. Sell to close the other side of the trade for as little loss a possible.
    3. Keep both long options and short respective options against them creating
    calendar spreads for both sides of the trade.
    4. Treat the put side of the trade and the call side of the trade as two
    completely different trades moving forward (each should now have its own
    defined exit strategy.
    2. Exercise patience in straddle and strangle trades. Give the stock a
    chance to pick a direction.
    3. Always keep track of our cost basis and how it changes as we roll
    the option.

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