January 16, 2009
How do you unwind from the negative side of a straddle option when I am option trading?
Mark W asked:
I am trying to learn more about option trading. I know how to use calls and puts and have made money doing this. But I now want to get involved in straddles, spreads and selling options. So if I am using a straddle how do I unwind from the negative side of the straddle when the stock is moving away from that side? How do I use a spread and how do I sell a seccessful option?
I am trying to learn more about option trading. I know how to use calls and puts and have made money doing this. But I now want to get involved in straddles, spreads and selling options. So if I am using a straddle how do I unwind from the negative side of the straddle when the stock is moving away from that side? How do I use a spread and how do I sell a seccessful option?
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Comments on How do you unwind from the negative side of a straddle option when I am option trading?
You sell the negative side when the underlying stock has settled into one direction.
For more detailed information on how to make properly use of Straddles, please visit (I wrote that page.
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To unwind, just sell the OTM (out of the money) option from your straddle.
To sell your options, you work it just like you bought it, except instead of selecting buy calls(puts) to open, you Sell calls(puts) to close.
There are a myriad of ways to use spreads. I advise against all of them unless you REALLY know what you’re doing. The floor traders have gotten used to a bunch of amatuers understanding spreads, and are pricing the options and their spreads against you. They are the house, and they will get their cut. You’re better off refining your directional trading skills and use long term options to follow trends. You have an advantage here, because your time focus is long enough to realize a gain from a week or more of trending. The floor trader can’t see past the next fifteen minutes in his trades.
There are a lot of educational websites you can explore. Try the educational section at. Also check out. Minyanville has a good primer on options strategies at.