Options Theory: Finding Straddles & Strangles
June 17, 2022
Here’s how to find straddle and strangle candidates.
Notes
Bias: Bi-Directional (+Gamma), Long Volatility (+Vega)
Structure: Buy ATM call & ATM put. Expiration must be after the next earnings announcement.
Finding Candidates: Want implied vol to rise. Find low IV. Often this occurs between earnings announcements. Maybe the stock is forming a coiled spring pattern like a symmetrical triangle and you expect a big move up or down.
- Search for low IVR
- Manually go thru my watchlist, look at charts, see if there’s a pattern that suggests big move is imminent.
- Earnings Season: Jan, Apr, Jul, Oct. (Late Feb-Early March, late May-early Jun, late Aug-early Sep, late Nov-early Dec)
* Earnings Season IV cycle gets TRUMPED by major market news/movement.
IVR Column Heading in Watchlist Code: http://tos.mx/JchyIwn
Iron Condors = Bet that options are overpriced, market moves less than expected
Bi-directional trades take the other side of that bet.
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