Thanks for the input. Discovering the risk graphs is what started me in this particular direction. I was plugging in numbers for possible strategies and experimenting with various 'what if' strategies with the idea of doing something with BP or BAC when this seemed to make sense. I've been using the free options simulator from OIC and it works but is a bit limited now that I'm getting serious.
Do you have any suggestions?
Lou
--- In
ConservativeOptionS trategies@ yahoogroups. com, "RobertH" <robhansen5252@ ...> wrote:
>
> Lou, check your definitions of strangles and straddles. It looks like you are experimenting with long strangles. Usually, when volatility is very high, you are paying a lot for the hope that the underlying takes off in one direction or the other. Before putting on the spread, check the risk graph for both the straddle and the strangle to see which one looks more appealing. The pros use the cost of a straddle to get an idea how much the underlying is expected to move when a catalyst (like earnings) is approaching. In high volatility environments, you get a lot of premium by selling straddles and strangles instead of buying them, but you need protection if the underlying explodes in either direction. That's where the iron butterflies and iron condors come into play. Learning how to adjust them in mid-stream is an art in itself. Good luck and give us some examples of positions you have taken or are considering if you want or need specific comments.
>
> RFH
>
>
> --- In
ConservativeOptionS trategies@ 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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