HOT TRADING STRATEGIES FOR A COLD MARKET
Daily Stock Market Equity and Options Trading Commentary

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Wednesday, July 7, 2010

Doji Confirmed! SPY Option Straddles Paid Off Big!

As stated this morning I expected a major move in the equity markets based on Tuesday's price action - I just didn't know the direction. As stated I was looking at opening option straddle positions on the widely traded S&P 500 SPDR (SPY). An option straddle is ideal for this type of situation.

Many use straddles before big events such as earnings, but be careful as the volatility will collapse following earnings and if the stock moves less than the derivative market is anticipating (which happens more times than you may think) you could lose much of the premium paid. To learn about straddles check out my Advanced Option E-book! But getting back to today's trade, once the market volatility came in from the initial spike at open, I took a slightly bullish bias and straddled the SPY by purchasing the 104 weekly put options and the 104 weekly call options. These new weekly options are ideal for this type of trade (closed at the end of day) as the premiums paid are very small. I am glad to say I closed my position at roughly 3:55 PM banking a very nice one day gain! Happy trading! Sphere: Related Content

1 comments:

444 said...

I think I have made about $200 total on options (that means I didn't lose any, or rather, my loss against my gain encompassing the 3 or 4 total trades I have made comes out to $200 positive) but I'm afraid to learn more than the very basic pre-kindergarten-level that I already know. I don't like it when I don't understand something - even when it turns out that I don't want to actually do it, once I learn about it. Since I am very curious, so I just might have to buy your book.

Congratulations on raking in the dough today. I hope it was a lot! :)

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