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April 20, 2022
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Chuck Hughes Makes His Boldest Prediction EVER

Even after starting back in the 80’s with just $4,600 and generating over $460,000 in profits after 2 years… *

Even after creating eight figures in trading opportunities from live trades…

And even after being crowned a 10X “Trading Champion”…

Chuck has NEVER seen an opportunity quite like this one!

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*Disclaimer: Stated results are atypical for a given period. Past performance is not indicative of any future results. Trade at your own risk.
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TradeWins Author Team

 

 

Tomorrow, you could begin doubling your account every single month starting with one letter.

The letter will come from a 20-year trading professional named Ian Cooper. He says, “In 2022, following my trades you would be doubling even tripling your account some months. Let me show you how.”

He will show you exactly what to do... and he’ll give you the blueprint for just $1.

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Keys to Profitability: Straddles and Strangles
by Rob Roy

The following is an overview of what is required to make the Straddles and Strangles profitable so that you – the trader – will understand completely the concepts that make the pieces fall into place.

In the simplest form, Straddles and Strangles need four considerations before placing the trade. Almost all option strategies need these considerations as well.
  1. Size of the move

  2. Speed of the move

  3. Time frame and

  4. Implied Volatility Environment
Of course, there are many more details, but all of them relate to one of these four in some manner.

Size of the Move

A trader must have an opinion on the size of the expected [?return, target?] from the stock before constructing a Straddle or Strangle. Without this the trader is blind. They have no idea when to take profits, and more importantly, they have no way to analyze the trade before placing it to make sure there is enough room to profit. Be mindful that the trader’s opinion of the stock will change along with targets and direction.

Speed of the Move

Options, as you may already know, are sensitive to the speed of the move. The stock moving to the expected target the next day or in three weeks, can have a vast difference in potential profits. Most often a trader won’t know the speed at which the stock will reach the targets. A little analysis of how the stock typically behaves can give the trader a clue to this. That said, when trading pure direction, the trader wants the stock to reach its target as quickly as possible. This is not the case for all option strategies, yet reaching the targets quickly is extremely beneficial for Straddles and Strangles.

Time Frame

Time frame is closely tied to speed of the move. The major difference comes down to choosing the expiration month to trade your options in. Should a trader’s opinion be that the stock would move in the next five days, they would opt for a shorter time to expiration. Obviously, the inverse can be said for a trader that expects the stock to move in the next six weeks: in this case, they would want a longer time to expiration. The overall key to trading the time frame in Straddles and Strangles is in the nature in how options work. Should the stock move to its target, the sooner-to-expiration options would yield a larger return than the longer-to-expiration options. Options that are closer to expiring will have more time decay, yet be more sensitive to the movement in the stock. While the longer-to-expiration options will have less time decay, and be less sensitive to the stock price change. This is the general concept, which provides hints at limits of how close or how far a Straddle and Strangle trader wants to be from expiration.

Implied Volatility

Implied volatility rules the option markets, and to a certain degree the stock market as well. A basic concept of how implied volatility works is needed to trade Straddles and Strangles. In simple terms, when implied volatility goes up, the option values go up as well. When implied volatility goes down, the option values go down. Because of this traders use implied volatility to determined when options are “cheap” or “expensive”. When trading Straddles and Strangles, traders are buying options. Obviously, it’s to a trader’s advantage to buy cheap options rather than expensive options. Of course expensive options can become more expensive during a trade which is the reason the trader must have an opinion on what implied volatility will do during the course of the trade. Implied volatility is one of the many components to an options value. It is possible for implied volatility to go down when a trader owns an option, and the trader still profits on the position.

Now you see that these four concepts: the size of the move, speed of the move, time frame and implied volatility can correlate to one another. They are interdependent in many aspects partly due to the formulas used to create an options price.

 
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