How to make money from Making Money Trading Straddles and Strangles | Trading Data Science
Those confused as to why we believe in managing straddles at 25% of max profit and 1 SD strangles at 50% won’t be after watching this segment which makes it all clear. The Doctor makes a house call to cure your confusion.
We are often asked why we believe in managing straddles at 25% and strangles at 50% of max profit. Dr. Data (Michael Rechenthin, Ph.D.) explains it all and makes it clear. He begins by explaining the theoretical option pricing model reasons first. He follows that up with some strong empirical data.
The first graph shows the theoretical effect of Theta on both a straddle and a strangle. Some notations are added which show profit levels at different time frames along with the percentage of max profit. Mike makes clear that the key figure is profit per day.
Another graph shows a straddle versus several different strangles. It makes clear that it takes much more time to reach 50% of max profit on a straddle and that the farther you go out on a strangle the faster you achieve the 50% level. Gamma risk is why it’s a big mistake to hold a straddle to expiration. Gamma risk “explodes” in the last few days.
The empirical data was shown next. Dr. Data first gave us the info for a 1 SD strangle. The results of managing at 25%, 50% and held until expiration and the median average for each was listed for P/L, days held, and most importantly P/L per day were show, Mike emphasizes that we should be concerned about the efficient use of capital. A similar table is shown for straddles. The results are noteworthy.
See more Skinny on Options: http://ow.ly/YLyis
======== tastytrade.com ========
Finally a financial network for traders, built by traders. Hosted by Tom Sosnoff and Tony Battista, tastytrade is a real financial network with 8 hours of live programming five days a week during market hours. From pop culture to advanced investment strategies, tastytrade has a broad spectrum of content for viewers of all kinds! Tune in and learn how to trade options successfully and make the most of your investments! Watch tastytrade LIVE daily Monday-Friday 7am-3:30pmCT: http://ow.ly/EbzUU
Subscribe to our YouTube channel: https://www.youtube.com/user/tastytrade1?sub_confirmation=1
How to make money from trading probability,options,trading,data science,Rechenthin,straddles,day trading,strangles,How to trade,call option,put option,profit,loss,learn to trade,tastytrade,market,stock,trade strategies
Tags: call option, data science, day trading, how to trade, learn to trade, Loss, market, options, probability, profit, Put Option, Rechenthin, stock, straddles, strangles, tastytrade, trade strategies, trading