12 lines
807 B
Plaintext
12 lines
807 B
Plaintext
The Risks with Short Straddles
|
||
Looking at an at-expiration diagram or even analyzing the gamma/theta
|
||
relationship of a short straddle may sometimes lead to a false sense of
|
||
comfort. Sometimes it looks as if short straddles need a pretty big move to
|
||
lose a lot of money. So why are they definitely among the riskiest strategies
|
||
to trade? That is a matter of perspective.
|
||
Option trading is about risk management. Dealing with a proverbial train
|
||
wreck every once in a while is part of the game. But the big disasters can
|
||
end one’s trading career in an instant. Because of its potential—albeit
|
||
sometimes small potential—for a colossal blowup, the short straddle is,
|
||
indeed, one of the riskiest positions one can trade. That said, it has a place
|
||
in the arsenal of option strategies for speculative traders. |