Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

incandenza

Short Strangles - a Question

By incandenza, in Beginners Forum

Recommended Posts

incandenza    10

incandenza
Posted

Hi folks - I'm hoping someone with more experience can help me get my head around a concept.

 

I'm looking at options trading strategies, and am studying short strangles. Assuming you didn't have the ability to monitor a short strangle 24/7, you'd want to put stop losses on the position.

 

How would one go about doing this using the spot market to render the position neutral at certain trigger points? (i.e. without limit buy/sell orders on the options themselves).

 

So assuming you put down a short strangle on GBPUSD, you would sell a put and a call out of the money, make the premium and wait for expiry hoping the GBPUSD didn't move beyond your strike range. What limit orders should you place in the spot market in order to limit the downside of this otherwise crazy-risky position?

 

Before anyone looks at me askance, I am not currently holding an uncovered short strangle, nor have I ever, this is a theoretical question.

 

Many thanks in advance...

 

Inc.

Share this post

Link to post
Share on other sites

symbios    10

symbios
Posted

I trade options on stocks for almost 2 years now and i do a lot of strangles and naked puts/calls. I've not done any strangles on forex nor do i intend to for various reasons.

 

Now, back to your question. When i trade strangles on stocks, i usually look for a couple of things. First, the volatility of the stock followed by support and resistance. I always try to pick stocks which are that volatile to begin with and i always look for intermediate support/resistance levels. Those would provide you with a mental stop on when to get out. If possible, have multiple support/resistances as buffer between your strike price and market price.

 

Relating to stop-losses, be careful of sudden spikes in volatility which could trigger your stop-losses even when the strike price isn't breached. To make matters worse, the fill price might just be ridiculous. My method is to have a mental stop instead of a physical stop. Coupled that with price alerts on my handphone, i normally have time to react to major events.So far, i've not had any major losses for the past 2 years of trading. :)

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
Go To Topic Listing

  • Similar Content

    • Lwayne11
      I lost my funds
      By Lwayne11
      I had a bad experience in trading. I did lost $17,350 in total and i when i try to cash out one story or the other keep coming up to me at every giving point of time so i give up on them.after several weeks i came across this agency,expert recovery that help me get back about 75 percent of my lost funds. I learnt thee is a class action court proceeding to sue scam binary companies but I believe that takes more time and money paid to lawyers is way expensive. You can talk to a recovery expert.
      Reach Asherellazar at protonmail dot com
    • DHARMIL
      SELL BANKNIFTY/NIFTY OPTION & FUTURE AT ₹2300/2700
      By DHARMIL
      SELL BANKNIFTY F&O - ₹2300
      SELL NIFTY F&O - ₹2700
      SELL STOCKS F&O - ₹5000
      Contact : 9173302081
    • Ninjatrader_Staff
      4 Options Trades: Buying and Selling Calls and Puts
      By Ninjatrader_Staff
      Here is a quick educational video we created on Options on Futures.
       
    • Ninjatrader_Staff
      Trade Options on Futures with NinjaTrader Brokerage
      By Ninjatrader_Staff
      Options on futures are now available to trade through NinjaTrader Brokerage! This expansion allows options traders to save on their trades with NinjaTrader’s deep discount commissions and benefit from industry-leading support.
      Why Trade Options on Futures with NinjaTrader Brokerage?
      ·  Discount Pricing: Save on trades with simple low rates
      ·  Span Margins: Real-time portfolio margining
      ·  Low Minimum: Open your account with only $1000
      In addition to the FREE NinjaTrader platform included with all brokerage accounts, traders will also have access to the CQG Desktop web-based platform to trade options on futures.
      ·  Current Clients: Contact Brokerage Support to start trading options on futures
      ·  New Clients: Open Your Brokerage Account
      Let Us Know How We Can Help
      Contact our brokerage team at 312.262.1289 to discuss how NinjaTrader’s solutions can be customized for both new & experienced traders.

      Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. View Full Risk Disclosure.
    • fuqs
      Extrapolating dividends
      By fuqs
      Let's assume I was able to imply dividends from liquid options for the next 3 years, but I want to price an option expiring in the 4rd year from now. How would practitioners normally extrapolate implied dividends? From what i've observed there is a significant risk premium in implied dividends far out (implied divs are sold at discount). Actually the dividend term structure is declining. Therefore probably it makes more sense to extrapolate implied dividend rather than historical growth

  • Topics

  • Posts

    • HFblogNews
      HFMarkets (hfm.com): Market analysis services.

      By HFblogNews · Posted

      Date: 9th May 2024.   Market Insights: The BOE’s Potential Dovish Pivot and Current Indications.     The Bank of England is in focus as the regulator will confirm their rate decision and how their future monetary policy path may look. The GBP trades sideways but the FTSE100 continues to trade higher. Economists are contemplating if the market is pricing a dovish tilt by the BOE. The Dow Jones was Wednesday’s best performing index, rising 0.48%. The DJIA’s best performing stock was Amgen which rose 2.33%. Federal Reserve members continue to apply further pressure on the market’s sentiment with more indications that inflation is too high. GBPUSD – Investors Focusing on A Potential Upcoming Dovish Pivot! The GBPUSD trades sideways and did not form a significant trend the day before. This morning the price trades slightly in favour of the US Dollar, however most institutions are waiting for confirmation from the Bank of England on monetary policy adjustment. The price movement will depend on the future guidance of the Governor and the Monetary Policy Committee’s votes.   The market is expecting the interest rate to remain at 5.25%. However, there’s anticipation that regulators may hint at upcoming monetary policy easing, potentially impacting the Pound. Analysts anticipate a shift to a “dovish” policy this year but differ on timing. Most foresee changes in June or August, possibly with two 25-point rate cuts. The price of the GBP will depend on when the BOE will indicate a rate cut is likely. If 1 or 2 members of the MPC vote for a cut and the Governor advises they are now considering a cut, then the GBP potentially could decline based on a June rate cut. Market participants are anticipating a dovish indication due to inflation declining for 3 consecutive months and declining to a 32-month low. In addition to this, the UK’s employment change has weakened for 2 consecutive months as has the UK GDP growth. Traders can see the market is pricing a dovish indication due to the GBP’s decline over the past 3 days as well as the bullish price movement seen on the FTSE100.   USA30 – When Will The Buy Signal Again Become Active? The Dow Jones was the best-performing US index as investors increased their exposure due to its connection with defensive stocks. 70% of the Dow Jones’ components rose in value and the best performing stocks were Amgen, Boeing and JP Morgan which all rose more than 2.00%. The next influential earnings report for the Dow will come from Home Depot next Tuesday morning. Investors are expecting a 23% rise in earnings compared to the previous quarter. In addition to this, analysts expect revenue to rise, and traders should note the company has beaten expectations over the past 4 reports. Home Depot stocks hold a weight within the Dow Jones of 5.78%.   The price of the index continues to trade above the 75-Bar EMA and above the “neutral” point on the RSI. These factors indicate buyers are controlling the market. However, this morning the price is retracing, therefore a buy signal will not be active unless the price rises above $39,091 which is the breakout level, or at least forms a bullish crossover (8-bar EMA & 18-bar SMA). Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Michalis Efthymiou Market Analyst HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Stocks4life
      Breakout and Swing Stock Ideas

      By Stocks4life · Posted

      WFC Wells Fargo stock, strong day, bull flag breakout watch above 61.57, https://stockconsultant.com/?WFC
    • Stocks4life
      Breakout and Swing Stock Ideas

      By Stocks4life · Posted

      $SSYS Stratasys stock, solid breakdown, from Stocks To Watch short, https://stockconsultant.com/?SSYS
    • zdo
      ,,,just Sayin...

      By zdo · Posted

      holy war.  why do ppl hate jews? why do ppl hate muslims? (btw my answers aren't 'pretty', pc, or even respectful... better say why before i do   ... just sayin')     holy war...  is there really such a thang?  ... just sayin’
    • Stocks4life
      Breakout and Swing Stock Ideas

      By Stocks4life · Posted

      NFLX Netflix stock, nice move, hit target 1, https://stockconsultant.com/?NFLX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.

  I accept