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+Trading the Short Straddle
+A short straddle is a trade for highly speculative traders who think a security
+will trade within a defined range and that implied volatility is too high.
+While a long straddle needs to be actively traded, a short straddle needs to
+be actively monitored to guard against negative gamma. As adverse deltas
+get bigger because of stock price movement, traders have to be on alert,
+ready to neutralize directional risk by offsetting the delta with stock or by
+legging out of the options. To be sure, with a short straddle, every stock
+trade locks in a loss with the intent of stemming future losses. The ideal
+situation is that the straddle is held until expiration and expires with the
+underlying right at $70 with no negative-gamma scalping.
+Short-straddle traders must take a longer-term view of their positions than
+long-straddle traders. Often with short straddles, it is ultimately time that
+provides the payout. While long straddle traders would be inclined to watch
+gamma and theta very closely to see how much movement is required to
+cover each day’s erosion, short straddlers are more inclined to focus on the
+at-expiration diagram so as not to lose sight of the end game.
+There are some situations that are exceptions to this long-term focus. For
+example, when implied volatility gets to be extremely high for a particular
+option class relative to both the underlying stock’s volatility and the
+historical implied volatility, one may want to sell a straddle to profit from a
+fall in IV. This can lead to leveraged short-term profits if implied volatility
+does, indeed, decline.
+Because of the fact that there are two short options involved, these
+straddles administer a concentrated dose of negative vega. For those willing
+to bet big on a decline in implied volatility, a short straddle is an eager
+croupier. These trades are delta neutral and double the vega of a single-leg
+trade. But they’re double the gamma, too. As with the long straddle,
+realized and implied volatility levels are both important to watch.