Straddle me this

[rapidex]

Straddles seem to good too be true, but maybe I'm missing something?

It seems all you need do is find a trending stock and place an ATM straddle out for 6+ months?

Anyone use alot of straddles?

Of course, it's a double debit to open, so bid and offer are crucial, but it seems like they could be very profitable.

Mind you, I'm paper trading them at the moment and haven't placed any in the real market.

Any comments - thanks.

 

[Awesomandy]

It seems all you need do is find a trending stock and place an ATM straddle out for 6+ months?

And if the stock then trades within a range for the next 6 months, that's a lot of money you've lost. It's a high risk, high gain strategy.

 

[wayneL]

Watch the vols too.

 

[Mofra]

Straddles are as close to the purest of the IV plays you can get IMO. At least with a long straddle your max loss is known up front, but you'd want a clear history of IV action & some pretty clear contingencies prior to entry.

Cheers & goodhunting