To: James C. Mc Gowan who wrote (3915 ) 9/14/1998 9:16:00 AM From: MonsieurGonzo Read Replies (2) | Respond to
James; RE:" LongStraddle Spreads "drivel you will see a posting with reference to this chart generator...quote.com OEX ,216 for a 216 minute chart of the OEX.X-100 index.crash , and how it hit OEX ~520 and bounced around there as a series of "waves " within a trading-range channel "level" ? Whenever it hit the perceived support at OEX ~520, we knew one thing for sure - that the OEX would either bounce UP a minimum of +10, maximum +20 points or, it would plunge DOWN to a wholly new trading-range "level".delta neutral LongStraddle = OEX 520 LONG:SHORT taken at the OEX 520 position (either on the OEX or, some sympathetic component stock thereof, or some other index) was, IMHO - a good trade.crashed on the fifth - to a new trading-range level at OEX ~470. Note that this "level" is upward-sloping; the perceived support is more of an UpTrend Line than a Horizontal Support, like OEX ~520 was. Still, Thursday afternoon, Friday morning was, IMHO another opportunity to enter a LongStraddle position with almost no risk .delta-neutral spread. Second, the option boyz have a nasty habit of "stripping" PREMs and playing with the BID-ASK "spreads" not only when options expiry approaches, but also when the daily bars on the DOW are averaging 2-300 points in width {grin}.do you pick the target for the long straddle, as each trading day starts, e.g. Friday close of SPX at 1009, and add maybe 5-6 points for strongish opening Monday or whatever, and buy in at 1015 with equal amounts of puts and calls at that strike price? Do I understand this strategy correctly ? bottom or top of one of these little "waves", James - price level , not time .bottom (or top - yet) of one of these "waves", James. Last 30-minutes Thursday, Friday OPEN was (a perceived support or, "bottom"). My tactic on Friday would have been to enter a 1:1 = 980 LONG:SHORT "straddle" at 980 . There was, IMHO a 50:50 chance of bouncing UP +15 SPX points, or plunging DOWN > -15 SPX points (to a wholly new trading-range level) which would have made $ either way.Also, what has been your holding period in this very volatile market condition ? Hit and Run , James - forget time {grin} I would have settled the 980 SPX LongStraddle at the end of Friday's session. If the SPX would have closed Friday near 980 , I would have held the LongStraddle until it broke out UP or broke DOWN from 980.Any thoughts on picking a sell target on the straddle trade ? too soon (^_^) A better question would be, "when do we enter another LongStraddle position (at the perceived top ) of the current 'wave' ?"apparent channel , within parallel (though upward-sloping) lines. On the safer side, IMHO - would be to enter a LongStraddle if/when we hit the medium-term DownTrend Line originating on 20-JUL with a second point on 25-AUG. I draw two DownTrend Lines here: the first is drawn between these two dates' closing prices (I usually use closing-price line charts to draw TrendLines) and, the second is drawn between these two dates high prices (the way most people do it), James.
