Lou - let's make it simple and put some numbers to this. BP is around 33-34.
So - you buy a 33 call @$2.40, buy a 32 Put @ $1.14. Total cost $3.54 + Commissions/fees. Don't know how many contracts, but lets say $3.75 total cost.
As BP moves down, call looses value, put worth more. Reverse as moves up. When the combined prices of put & call exceed your cost of $3.75, you can close out and make money. The variation today was from a high of $34.05 to a low of 33.25.= .80. I do not see it - - Unless you knew to sell the put at the low and the call at the high. If you did, I want to follow you.
-- In ConservativeOptionStrategies@yahoogroups.com, "Louis" <loupi3@...> wrote:
>
> Lately I've been experimenting with straddles (I hope I've got my terminology correct)where I buy a put and a call about one strike apart for the same month. As far as I can see, max loss is the cost of the two options and max gain is basically unlimited regardless of whether the stock goes up or goes down. I dipped my toe in a bit with BP and BAC, figuring their volatility would give me some practice in using this method. The past two days have been interesting watching them ride up and/or down on the u-shaped P&L graph.
> Any thoughts on this?
> Lou
>
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