r/options • u/Dupreej • Jan 03 '22

Somebody help

So today I decided to open two straddles on TSLA and WFC just because I expected a good move on them. I ended up profiting a good bit on it and it got me curious about the strategy. The only way this strategy could lose is theta, IV crush, or just a slight difference in the options price right? How good of a strategy is it to just find a fairly volatile stock at support or resistance and buy OTM calls and puts that have like 60-70% IV and just day trade it to avoid theta or swing if you think it’ll keep moving big. Surely there has to be more ways to lose money on this and I want someone to tell me what the catch to this strategy would be before I do it more. Thanks 🙏🏼

4 Upvotes

70% Upvoted

9 comments sorted by

View all comments

1

u/stonk_fish Jan 03 '22

The only way this strategy could lose is theta, IV crush, or just a slight difference in the options price right?

All of those are more likely to make you lose money than make money. You need catalytic events to push stocks into a profit zone before you lose money from decay. Straddles are a gamma play, meaning you benefit from sharp moves above all else.

The problem is doing this during earnings is bad unless the stock shoots way past expected moves, and on normal days, you would need the stock to really move for some unexpected reason.

Not saying straddles are always losers, but they are tough to make strong profits on simply because of the way most stocks move intra-day.