When I first started learning different option strategies, long straddles seemed the easiest and the way to riches without any significant risk.
Simply buy a CE and PE of same strike before an event, whichever way rhe stock moves post event you make money
Simply buy a CE and PE of same strike before an event, whichever way rhe stock moves post event you make money
But real life is a tougher place, so this did not work in practice 🤣
Vols went up before event pricing in the risk, and since vols over estimate event impact in general, majority of the time there is a vol crush post event and straddles lose money. ( this is why sellers sell)
Vols went up before event pricing in the risk, and since vols over estimate event impact in general, majority of the time there is a vol crush post event and straddles lose money. ( this is why sellers sell)
But the markets now is a strange place. Vols refuse to go up before an event. We have GDP data today evening and Gujarat election results within next weekly expiry. The cost is 1.3% of Nifty for the next week straddle with 8DTE .
So whoever is selling this straddle does not expect Nifty to move 1.3% from here, either up or down within next Thursday? Does not make sense.
Vols not rising before event makes it a no brainer to buy this straddle
Vols not rising before event makes it a no brainer to buy this straddle
With vols not going up before event and with such low vols, chances of further vol crush are slim. Plus, even if markets now go up further, I think traders will get a bit nervous/fearful pushing vols up.
Let's see whether my thesis works out 🙏
Let's see whether my thesis works out 🙏
Hey @SarangSood , what are the historical average straddle prices in percentage terms for next week expiry a day before current weekly expiry?
Can u plz share
Can u plz share
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