Most traders tend to base their trades on whether they believe an asset will go up or down.
I get it. It makes sense—after all, profits (or losses) are determined by the asset’s price movement. Ideally in the direction of the trade, since that’s the whole point.
But there’s another way to bet on an asset’s price movement—without taking on a stance on which direction it’ll go. It’s called long straddle options trading.
Long straddle options consist of buying both the long call and long put in a certain name, with the same strike price and expiration date.
The position essentially bets that the investment will either increase or decrease dramatically in value by the time the option expires. It doesn’t matter which—you’re not betting that the asset will move in a specific direction… just that it will move.
This is a great strategy if you think an asset is going to be particularly volatile.
One of the best ways to truly take advantage of this strategy—and to make the biggest gains—is to spot the most explosive stocks and options right before they breakout. It’s your lucky day too, because we have a special formula that does just that. This formula discovered names that have gone on to explode 420%… 385%… or even 1,453%!
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It’s no simple matter to figure out which names are about to go up—so to make it easier for you, we put together a blueprint on this formula… which would have paid you 227,976.56% over the last 20 years (the S&P 500 barely delivered 180% over that same timeframe).
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Now the difference between long straddle options and other long strategies is that the profits (or losses) don’t come from the asset’s movement in a particular direction. They just care that the asset moves—and the more it moves in either direction, the greater the profits.
Here’s how it works…
Most long straddles involve purchasing both the call and the put at the money. The idea is to have equal exposure on both the long and the short side.
In order for the trade to be successful, the asset must move in one direction enough that the gains from one side of the spread to cover the losses of the other, and then some. The “some” is your profit.
The biggest mistake traders make with this strategy is that they try to buy into events they believe will cause the stock to be volatile (like earnings reports or a set announcement). The problem with doing this is that in most cases, these events are already priced into the options. So the price movement wouldn’t be enough to cover the spread.
And unlike most options strategies, long straddles depreciate the longer you hold them, because both legs lose value with time.
The long and the short of it is that long straddle trading is a tricky business. It’s hard to be profitable. It takes time, patience, and a thorough understanding of what really causes substantial price movements. But if you have those three things, it’s a great way to bet on the volatility of a particular asset.
On top of keeping those three things into consideration while trading, our special formula could add even more success to your trading.
This 19 year old formula took a simple $1,000 and turned it into nearly over $8 million.
Here’s how it works…
We look for explosive breakout opportunities in the small cap sectors, and once identified, we send out alerts every single Monday.
In those alerts, we give you specific instructions on what options we are buying, the price, and our intentions with the options. We literally spoon feed you trades.
All you need to do is place the options, sit back, wait for our exit instructions, and reap the benefits (put more money back into your pocket)!
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Finally, going beyond just options, every profitable trader will tell you that the mindset they bring to their trading is the most crucial piece of the puzzle. Trouble is, too few beginning traders take the steps necessary to correct or improve their own responses to market behavior, and wonder why they aren’t able to trade as well as they hoped. They don’t invest in their trading mindset. Here’s how to fix that oversight…
This article is supplied courtesy of WealthPress.