Long straddle example excel
- Long Straddle Options Strategy (Best Guide - projectoption
- Long Straddle Options Strategy - Fidelity
- Option Straddle (Long Straddle) Explained | Online Option
If we were to avoid this "Gamma Risk' by exiting the strangles two weeks earlier than the expiry date of the option contract, can we see any gains compared to holding them till the expiry. To answer this question, we enter 85, 95 & 65 DTE strangles but instead of holding them till expiry, we will exit the strangles 65 days earlier. Below are the tabulated results of this variation.
Long Straddle Options Strategy (Best Guide - projectoption
Among the four strategies, 95 DTE strangles performed better in terms of win rate, average P& L per day and maximum profit in a trade. And therefore, one can conclude that 95DTE is most optimal strangle strategy to enter & hold till expiry if these results holds true in the future as well.
Long Straddle Options Strategy - Fidelity
Very well articulated and explained in a very neatly. I have following queries, kindly clarify.
To calculate BankNifty SD, we need IV. As per option chain each strike price has different IV. Can you clarify how to choose IV ?
To calculate Nifty SD, we need IV, As per option chain each strike price has different IV. Can you clarify how to choose IV ?
DTE, is it business days or calendar days ?
Option Straddle (Long Straddle) Explained | Online Option
Profit potential is unlimited on the upside, because the stock price can rise indefinitely. On the downside, profit potential is substantial, because the stock price can fall to zero.
If the stock price is above the strike price at expiration, the put expires worthless, the long call is exercised, stock is purchased at the strike price and a long stock position is created. If a long stock position is not wanted, the call must be sold prior to expiration.
A long straddle profits when the price of the underlying stock rises above the upper breakeven point or falls below the lower breakeven point. The ideal forecast, therefore, is for a “big stock price change when the direction of the change could be either up or down.” In the language of options, this is known as “high volatility.”
Compared to Nifty straddles there is vast under performance of BankNifty Straddles when held till expiry. The only exception being 65DTE straddles. The under performance of BankNifty straddles can be attributed to the fact that BankNifty being a more volatile instrument than Nifty is more prone to accumulating losses due to gamma risk during the fag end of expiry.
The 755 call expires worthless. The 755 put has intrinsic value, but not more than the premium the trader paid when buying the straddle. Consequently, the long straddle position is not profitable.
Hi ragunath excellent report.
Is it possible to include max drawdown factor into your analysis.
And where can I get same 5years worth option data for bactesting.
These observations states the fact that implied volatility of the stock most of the times overstates real volatility and a trader should try to capture this difference to make the option selling strategies more profitable.
There is a vast improvement in the win-rate and profitability of BankNifty 95DTE & 65DTE straddles when placed under high IV conditions. In this condition, 95DTE straddle outperformed 65DTE in terms of profitability.
In this step, we test for the performance of 85, 95 & 65DTE BankNifty Strangles where we exit them 65 days before expiry. Results are tabulated as shown below.
Long straddle option is a bet on volatility. An investor who implements the long straddle option strategy must view the stock as more volatile than the market does.
In the same way, Max. Profit tells about the maximum profit obtained in a specific trade among all the trades while Max. Loss tells about the maximum loss incurred in a particular trade among all trades. These values tells us about the extremes of profit or loss that were observed in strangle strategies over the past 5 years.
If the stock price is at the strike price of a long straddle at expiration, then both the call and the put expire worthless and no stock position is created.
Since the four strangles are held for different periods of days, the best metric & important criteria to gauge the performance of a particular strategy will be Average P& L Per Day which is the average profit gained or loss incurred on a per-day basis.
The time value portion of an option’s total price decreases as expiration approaches. This is known as time erosion, or time decay. Since long straddles consist of two long options, the sensitivity to time erosion is higher than for single-option positions. Long straddles tend to lose money rapidly as time passes and the stock price does not change.
In conclusion, 95DTE strangle when held till expiry & 85DTE strangle when exited 65 days before expiry are the most optimal strategies under those conditions to place for good profitability in BankNifty strangles.
Lastly, at expiration, the straddle's position delta is -655. Since an in-the-money long put expires to -655 shares of stock, the position delta of -655 makes sense.