Trading for Bigger Profits
Basically when people speak of investments in stocks, straddle option strategies are part of it. They are like bread and butter when it comes to investments. It is a general in stocks investments that the price of any stock creates a large impact on a company’s earnings. And because these companies often rely the growth of their earnings on stocks, many of them pay very close attention to announcements. Whether the announcements are losses or gains, either scenario can be both potentially profitable for any investor with a long straddle option trading. Now, what are the mechanics of long straddle and why does it often lead to bigger profits?
When you say long straddle, it is one of the best straddle option strategies wherein buying a call option and a put option are involved. This is simply buy and put of options with the same expiration date and strike price. Speaking of volatility, a long straddle option will require you to determine when a specific earning for a stock will be announced. Afterwards, upon hearing the announcement, you have to analyze the history of the stock being announced whether it is volatile or it had received large reaction from other buyers after the announcements. Assuming it is a potential stock, your next step would be to wait for the next earning announcements and immediately establish your long straddle option before such earnings will be announced.
What are the benefits of straddle options? Although there are two types of straddle option trading, that is, long and short; many found long straddle very effective in producing bigger profits. Why? One of the primary advantages of long straddle is that you actually do not need to accurately forecast a stock price direction. It doesn’t matter if the prices rise or fall when it comes to long straddle. You see, it is a win-win solution. What only matters is that the stocks’ price must move farther and generate profits prior to option expiration. Another advantage is that this option gives you opportunity to take advantage of situations like upcoming earnings, anticipated breakouts, which are followed by consolidation, and extremely low option premiums based on low implied volatility.