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  1. #1
    Active Member RichardD's Avatar

    Why not do this with straddles? !!!

    Hi guys

    I was wondering about why not do a straddle (so opening simult. a call and a put) everytime before a high-impact news is due to release? I mean it's just seems so simple and there's a so high chance that markets will move a very big before those news (NFP for instance, or when Bernanke speaks, those are a surefire way to high vol) that it's like guaranteed profit. What am I missing here?

    Thanks

  2. #2
    Master Member SeasaltMcFish's Avatar
    Because you will always lose money that way. One of the two will be wrong and your payout is lower than 100%.

  3. #3
    Master Member Bogdan G's Avatar
    Quote Originally Posted by RichardD View Post
    Hi guys

    I was wondering about why not do a straddle (so opening simult. a call and a put) everytime before a high-impact news is due to release? I mean it's just seems so simple and there's a so high chance that markets will move a very big before those news (NFP for instance, or when Bernanke speaks, those are a surefire way to high vol) that it's like guaranteed profit. What am I missing here?

    Thanks
    Try that with vanilla options.
    In Binary Options this is how it goes:

    Scenario 1:
    Put = Win => Profit 75 bucks (average payout model)
    Call = Lose => Loss of 100 bucks
    Result: a loss of $25


    Scenario 2:
    Put = Lose => Loss of 100 bucks
    Call = Win => Profit 75 bucks (average payout model)
    Result: a loss of $25

    Bernanke speeches are no longer (that) important He is no longer Chairman of teh Fed. Yellen is.

  4. #4
    Active Member RichardD's Avatar
    Oh sry, I automatically meant with vanilla options. Could you guys elaborate on that? I mean obviously with binary options you got limited upside but with vanillas you don't that's why I'm asking this.
    Also I meant Yellen yeah.. my bad.

  5. #5
    Master Member Bogdan G's Avatar
    You will have to try vanilla on your own and do your research. There are a lot of little things that can make you lose money with straddles although at first glance it looks like you cannot lose. For instance, at news time, At the Money Calls and Puts are a lot more expensive than normal so one of them has to travel a huge distance to cover the other. If you dont wanna buy ATM because they are too expensive, you will have to buy OTM options and that opens teh door for more trouble, choices, decisions, ways of losing, etc

  6. #6
    Senior Member grindtime's Avatar
    I wonder if this tactic would work opening a position in forex the opposite way of placing a binary option? Right before news on USD lets say I place a $100 CALL on USD/JPY but open a SHORT position on my forex platform. Wondering if their is a mathmatical way to ensure profit doing this? With the forex position , we get leverage so if we opened 1 lot with 500-1 leverage we would need a margin of 200 and would be making about $10 a pip. Which many times a release can move 40-50 pips either way.

    So would have to go down 10 pips to match the $100 CALL we lost. But chances are it would make 40-50 pips. If price starts going up we close the forex position and open multiple 60 sec CALLS at max amount, and ride the wave.

    Sounds like it may work Math wise. Maybe you guys can elaborate on this for me.

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