a capital gain. The lower strike bought puts willhave the effect of uncapping your profit potential; the higher strike sold putswill reduce the cost basis.
Net Position■
This can be a net debit or net credit transaction because while your sold putswill be more valuable than your bought puts, you’re buying more puts thatyou’re selling.
■
Your maximum reward on the trade is uncapped because you are buying moreputs than you’re selling. Your total risk on the trade is limited to the differencebetween the lower and middle strike prices less your interim risk.
Effect of Time Decay■
Time decay is generally harmful when the position is losing money, particularly around the middle strike.
Appropriate Time Period to Trade■
Depending on the reasons for the trade, you will be safest to choose a mediumto long term to expiration, enough time to allow the underlying asset to moveand make the position profitable without time decay destroying the longoptions.
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Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure you understand the direction of the trend and identify a cleararea of both support and resistance.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
The selection of your option legs really depends on whether you’re using thestrategy as a repair to the Bull Put Spread or as a Bull Put Ladder in its ownright. You really need to use online tools to evaluate the optimum trade inyour chosen context, but here we’ll assume the intent is to repair the Bull PutSpread.
■
Lower Strike—One or two strikes below the middle strike.
■
Middle Strike—One or two strikes below the higher strike because you started with a Bull Put Spread.
■
Higher Strike—Below support, preferably OTM.
■
Expiration—Typically, a Bull Put Spread is a short-term income strategy, so ifyou’re adding the lowest buy leg to repair the original Bull Put, then by definition it will have been short-term (one month) trade. However, if trading theBull Put Ladder in its own right, you are long two puts, so a medium term toexpiration will be safer. Use the same expiration date for all legs.
3.6.3 Risk Profile■
Maximum Risk
Limited to the difference between the middle and higherstrikes plus the net debit.
■
Interim Risk
[Net debit]
■
Maximum Reward
[Lower strike  maximum risk]
■
Breakeven Down
[Lower strike  maximum risk]
■
Breakeven Up
[Higher strike  net debit] (or  net credit)
Vertical Spreads
3.6.4 Greeks
Risk ProfileThe position makesits maximum profit ifthe stock plummets.However, as anadjustment to the BullPut Spread, the position can be profitableif the stock remainshigher than the highest strike.
Key:ExpirationToday – 3 monthsTime(t) – 1 monthRisk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable andunhelpful when it isunprofitable.
Delta
Vega
VegaVolatility is unhelpfulto the position whenit is profitable.
Gamma
Rho
RhoHigher interest ratesare generally unhelpful to the positionparticularly when thestock reaches lowerlevels.
DeltaDelta (speed) is negative at lower levelsand turns positive asthe position changesdirection.GammaGamma (acceleration)peaks around thelower strike.
3.6.5 Advantages and DisadvantagesAdvantages■
Uncapped profit potential.
■
Capped risk.
Disadvantages■
Confusing as to whether this is a bullish or bearish strategy.
■
The trade may be a net debit, whereas the standard Bull Put Spread is a netcredit.
■
Typically used as a repair to a Bull Put Spread; therefore, this is only for moreadvanced traders.
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3.6.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the putsyou sold and selling the puts you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attemptto profit from it.
3.6.7 ExampleABCD is trading at $52.00 on May 15, 2004.Buy the August 2004 40 strike put for $1.20.Sell the August 2004 45 strike put for $2.40.Sell the August 2004 50 strike put for $4.60.
Net CreditInterim Risk
Premium sold  premiums bought$4.60  $1.20  $2.40  $1.00Net debitHere there is a net credit, so interim risk doesn’tapply.
Maximum Risk
Higher strike  middle strike  net debit (or  netcredit)$50.00  $45.00  $1.00  $4.00
Maximum Reward
Lower strike  maximum risk$40.00  $4.00  $36.00
Breakeven (Downside)
Lower strike  maximum risk$40.00  $1.00  $39.00
Breakeven (Upside)
Higher strike  net debit (or  net credit)$50.00  $1.00  $49.00
Max ROI (If Stock Falls to Zero)
900.00%
Interim ROI (If Stock Rises AboveHigher Strike)
25.00%
Vertical Spreads
3.7 Bear Call LadderProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Uncapped
Capital Gain
!
Advanced
Bullish
High Volatility
■ Short Call
Capped
■ Long Call■ Long Call
3.7.1 DescriptionAgain, can you see why Ladders are so confusing? Here we have a “Bear CallLadder,” yet looking at it would suggest that it has to be a bullish strategy!The Bear Call Ladder is an extension to the Bear Call Spread. By buying anothercall at a higher strike, the position assumes uncapped reward potential if the stocksoars.The problem is that now it’s not totally clear if we have a bullish or bearish strategy, but because we are net long calls and we have uncapped profit potential if thestock rises, do we have to call this a bearish strategy? The answer lies in the reasonfor the trade and the position of the stock relative to the strikes.Because we’re net long options (and particularly OTM options), we’re better offtrading this as a longer-term strategy in order to counter the effects of time decay.So, in summary, if the stock rises above the higher (buy) strike, we make potentially uncapped profit; if the stock falls to anywhere between the middle and lowerstrikes, we make our maximum loss. The extra leg also ensures that we may havetwo breakeven points.
Sell call
Buy call
Buy call
Bear Call Ladder
Steps to Trading a Bear Call Ladder1. Sell lower strike calls.2. Buy the same number of middle strike calls with the same expiration date.3. Buy the same number of higher strike calls with same expiration date.Steps In■
The selection of your option legs really depends on whether you’re usingthe strategy as a repair to the Bear Call Spread or as a Bear Call Ladder inits own right.
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Try to ensure that you understand the direction of the trend and identify aclear area of both support and resistance
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
In any event, look to unravel the position at least one month before expiration, either to capture your profit or to contain your losses.
3.7.2 ContextOutlook■
A Bear Call Ladder is a Bear Call Spread with an additional bought call legfurther OTM. Although this strategy has an uncapped reward profile as theunderlying asset rises significantly, with Bear Call Ladders, your outlook isdependent on the relationship between the stock price and the lower strikeprice. Because we are buying an additional call leg, we can categorize our outlook here as being bullish. Typically a Bear Call Ladder arises when a BearCall Spread has gone wrong and the trader adjusts the position to becomebullish.
Rationale■
To execute a bullish trade for a capital gain while reducing your maximumrisk. The higher strike bought calls will have the effect of uncapping yourupside potential.
Net Position■
This can be a net debit or net credit trade because while your sold call will bemore valuable than your bought calls, you’re buying more calls than you’reselling.
■
Your maximum risk on the trade is capped because you are buying more callsthan you’re selling. Your maximum reward on the trade is unlimited to theupside.
Effect of Time Decay■
Time decay is generally harmful when the position is losing money andhelpful when the position is profitable.
Vertical Spreads
Appropriate Time Period to Trade■
Depending on the reasons for the trade, it’s safest to choose a medium to longterm to expiration, enough time to allow the underlying asset to move andmake the position profitable without time decay destroying the long options.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure you understand the direction of the trend and identify a cleararea of both support and resistance
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
The selection of your option legs really depends on whether you’re using thestrategy as a repair to the Bear Call Spread or as a Bear Call Ladder in its ownright. You really need to use online tools to evaluate the optimum trade inyour chosen context, but here we’ll assume the intent is to repair the Bear CallSpread.
■
Lower Strike—Slightly OTM, just above resistance for the stock.
■
Middle Strike—One or two strikes above the lower strike, i.e., further OTM.
■
Higher Strike—Above the middle strike, i.e., even further OTM.
■
Expiration—Typically, a Bear Call Spread is a short-term income strategy, so ifyou’re adding the lowest buy leg to repair the original Bear Call, then by definition it will have been short-term (one month) trade. However, with the BearCall Ladder, you are long two calls, so a medium term to expiration (sayaround six months) would be safer. Use same expiration date for all legs.
3.7.3 Risk Profile■
Maximum Risk
Limited to the difference between the lower and middlestrikes plus the interim risk.
■
Interim Risk
[Net debit]
■
Maximum Reward
Uncapped
■
Breakeven Down
Lower strike  net debit (or  net credit)
■
Breakeven Up
[Higher strike  maximum risk]
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3.7.4 Greeks
Risk ProfileThe position makesits maximum profit ifthe stock soars higher. However, as anadjustment to theBear Call Spread, theposition can be profitable if the stockremains lower thanthe lowest strike.
Key:ExpirationToday – 3 monthsTime(t) – 1 monthRisk Profile
Theta
ThetaTime decay is helpfulto the position atlower levels andbecomes harmful athigher levels.
Delta
Vega
VegaVolatility is helpful tothe position at higherlevels.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position particularly when the stockreaches higher levels.
DeltaDelta (speed) is negative at lower levelsand turns positive asthe position changesdirection.GammaGamma (acceleration)peaks around thehigher strike.
3.7.5 Advantages and DisadvantagesAdvantages■
Uncapped profit potential.
■
Capped risk.
Disadvantages■
Confusing as to whether this is a bullish or bearish strategy.
■
The trade may be a net debit, whereas the standard Bear Call Spread is a netcredit.
■
Typically used as a repair to a Bear Call Spread; therefore, this is only for moreadvanced traders.
Vertical Spreads
3.7.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the callsyou sold and selling the calls you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attemptto profit from it.
3.7.7 ExampleABCD is trading at $48.00 on May 15, 2004.Buy the August 2004 50 strike call for $4.20.Sell the August 2004 55 strike call for $2.40.Sell the August 2004 60 strike call for $0.80.
Net Credit
Premium sold  premiums bought$4.20  $2.40  $0.80  $1.00
Interim Risk
Net debitHere there is a net credit, so interim risk doesn’tapply.
Maximum Risk
Middle strike  lower strike  net debit (or  netcredit)$55.00  $50.00  $1.00  $4.00
Maximum Reward
Uncapped
Breakeven (Downside)
Lower strike  net debit (or  net credit)$50.00  $1.00  $51.00
Breakeven (Upside)
Higher strike  maximum risk$60.00  $4.00  $64.00
Interim ROI (If Stock Falls BelowLower Strike)
25.00%
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3.8 Bear Put LadderProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Uncapped
Capped
Income
Advanced
Neutral
Low Volatility
■ Short Put■ Short Put■ Long Put
3.8.1 DescriptionThe Bear Put Ladder is an extension to the Bear Put Spread. By shorting another putat a lower strike price, the position assumes uncapped risk potential if the stockplummets downwards. Again, the problem is that now it’s not totally clear if wehave a bullish or bearish strategy, so we have to designate it as a direction neutralstrategy! We’d love the stock to fall to the middle strike price but not below the lowershort put strike price. Anywhere in between the middle and higher strike is ideal.Because of the dangers of uncapped risk, this strategy becomes more appropriatefor a short-term income trade. The net effect of the lower short strike is to reduce thecost and breakeven of the Bear Put Spread and adjust the directional nature of thetrade. The lower put strike prices are further OTM and will therefore have lowerpremiums than the higher strike bought put.So, in summary, if the stock rises above the higher (buy) strike, you can make aloss; if the stock falls to anywhere between the middle and lower (short) strikes, youmake your maximum profit; if the stock falls below the lowest strike, then you canmake unlimited losses. The extra leg also ensures that you may have two breakevenpoints.
Sell put
Sell put
Buy put
Bear Put Ladder
Steps to Trading a Bear Put Ladder1. Sell lower strike puts.2. Sell the same number of middle strike puts with the same expiration date.3. Buy the same number of higher strike puts with the same expiration date.Steps In■
Try to ensure that the trend is downward but identify a clear area of support and resistance.
Vertical Spreads
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock rises above your stop loss, then sell the Long Put, and if you’renot permitted to trade Naked Puts, then unravel the entire position.
3.8.2 ContextOutlook■
A Bear Put Ladder is a Bear Put Spread financed by selling an additional putfurther OTM. Although this strategy has an uncapped risk potential if theunderlying asset falls significantly, with Bear Put Ladders, your outlook isdependent on the relationship between the stock price and the higher strikeprice. If we look at the strategy as an extension of a Bear Put Spread, then ouroutlook becomes conservatively bearish. However, for our purposes we’regoing to call this a direction neutral strategy.
Rationale■
To execute a direction neutral/conservatively bearish trade for enhancedincome. The lower strike sold puts will have the effect of uncapping yourpotential risk.
Net Position■
This can be a net debit or net credit trade because while your bought puts willbe more expensive than your sold puts, you’re selling more puts that you’rebuying. Most of the time this is likely to be a net debit trade.
■
Your maximum risk on the trade is uncapped to the downside because you areselling more puts than you’re buying. Your maximum reward on the trade islimited to the difference between the middle and higher strike prices less yournet debit or plus your net credit.
Effect of Time Decay■
Time decay is generally helpful when the position is profitable, particularlyaround the middle strike.
Appropriate Time Period to Trade■
You will be safest to choose a shorter term to expiration in order to avoid thepossibility of an uncapped loss scenario if the underlying asset falls too much.
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Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is downward but identify a clear area of supportand resistance.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
The selection of your option legs really depends on whether you’re using thestrategy as a repair to the Bear Put Spread or as a Bear Put Ladder in its ownright. You really need to use online tools to evaluate the optimum trade in yourchosen context.
■
Lower Strike—One or two strikes below the middle strike, depending on theamount of premium you can get.
■
Middle Strike—One or two strikes below the higher strike.
■
Higher Strike—Around ATM—use online tools to find the optimum yieldsand breakeven points at and before expiration.
■
Expiration—Because this started as a Bear Put Spread, you’d preferably haveover six months; however, this can become dangerous with a Bear Put Ladderbecause you are now a net seller of options, which typically dictates that ashorter time to expiration is preferable. Use the same expiration date for alllegs.
3.8.3 Risk Profile■
Maximum Risk
Lower strike  [higher strike  middle strike]  net debit
■
Interim Risk
Net debit.
■
Maximum Reward [Higher strike  middle strike  net debit]
■
Breakeven Down
[Lower strike  maximum reward]
■
Breakeven Up
[Higher strike  net debit]
Vertical Spreads
3.8.4 Greeks
Risk ProfileAs the stock pricefalls toward the middle strike, the position moves into profit.Maximum profit isachieved betweenthen lower and middle strikes. The position then falls as thestock falls below thelower strike.
Key:ExpirationToday – 3 monthsTime(t) – 1 monthRisk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable.
Delta
Vega
VegaVolatility is unhelpfulto the position whenit is profitable.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position, particularly when thestock reaches lowerlevels.
DeltaDelta (speed) is positive at lower levelsand turns negative asthe position changesdirection.GammaGamma (acceleration)peaks inverselyaround the lowerstrike, and then positively around thehigher strike.
3.8.5 Advantages and DisadvantagesAdvantages■
Lower cost and better breakeven scenario than a Bear Put Spread.
■
The farther away from expiration you are, the more downside protection youhave in the event of the stock declining rapidly.
Disadvantages■
Confusing as to whether this is a bullish or bearish strategy.
■
Capped upside if the stock rises.
■
Uncapped downside if the stock falls.
■
Typically used as a repair to a Bear Put Spread; therefore, this is only for moreadvanced traders.
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3.8.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the putsyou sold and selling the puts you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attempt toprofit from it.
3.8.7 ExampleABCD is trading at $26.10 on May 14, 2004.Sell the June 2004 $22.50 strike call for $0.30.Sell the June 2004 25 strike call for $1.00.Buy the June 2004 $27.50 strike call for $2.40.Net Debit
Premium bought  premiums sold$2.40  $1.00  $0.30  $1.10
Interim Risk
Net debit$1.10
Maximum Risk
Lower strike  [higher strike  middle strike]  net debit$22.50  ($27.50  $25.00)  $1.10  $21.10
Maximum Reward
Higher strike  middle strike  net debit$27.50  $25.00  $1.10  $1.40
Breakeven (Downside)
Lower strike  maximum reward$22.50  $1.40  $21.10
Breakeven (Upside)
Higher strike  net debit$27.50  $1.10  $28.60
Max ROI
6.64%
Interim ROI
Interim reward/maximum riskN/A (there is no interim reward here, there is interim risk;therefore, there is no interim ROI).
4Volatility StrategiesIntroductionVolatility strategies are defined as those in which you can make a profit whether thestock moves up or down. The point is that you don’t care which direction it moves,as long as it moves explosively in one direction or the other. The trick, of course, isspotting something that’s about to make that move and then determining how totake advantage of it!In my workshops, I always ask my delegates who’s ever taken a stock tip before.Typically a number of sheepish faces look around the room at each other before thehands start to rise, and them I usher them all upwards! So, how about you? Haveyou ever taken a red-hot stock tip? I bet you have . . . or will some time in thefuture!So, if you took a tip, what happened? Did you win, or did you lose? Here’s wheremost people admit that most of the tips went the wrong way. Very rarely does nothing happen—occasionally it goes your way, but in many cases, the precise oppositehappens, time and time again!The reality is that, as human beings, most of us will listen to a persuasive voicewhose owner appears convinced as to the authenticity of the information he or sheis now imparting to you. I tell most people that when evaluating a company, the lastperson you should ever listen to is the CEO, with the exception of the incomparable Warren Buffett! Typically, CEOs are rewarded on the strength of the performance of their companies in terms of profitability and share price. Has a CEO everconfided in you that his company is junk and you should run away from it? Ofcourse not! So it’s unlikely that you’re going to get an objective analysis from aCEO.So the question is this—what do we do if we get a stock tip and we’re temptedto follow it? Well, I’m not so aloof as to completely look the other way, so I’m not
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going to preach that you should either! Instead, here’s what to do. Typically a stocktip is a precursor to a big move in a stock. The rumors are flying around, and there’spent-up activity in the trading of the stock. The only things you don’t know are thetiming of such a move and the direction it’s going to turn. Typically the incidentwon’t be too far away, especially if the tip is concerning an announcement or newsevent. From here, one of three things is most likely to happen:1. The news event happens as you were told it would, and the stock movesaccordingly.2. The news event happens in precisely the opposite way, and the stock accordingly explodes the other way!3. The news event doesn’t happen . . . and the stock moves the opposite way.Occasionally the stock won’t budge, but it’s pretty rare. Why? Well, because peoplewere expecting at least something to happen, and when nothing happens, there’seither mass disappointment or mass relief. The point is that there will be a reactionto nothing, just as much as there would have been a reaction to something!There are two great strategies for handling stock tips. The first is the Straddle,which we’re going to cover in this section, and the second is the Synthetic Call,which we’re going to cover in Chapter 7, “Synthetic Strategies.” The Straddleinvolves buying and selling calls and puts with the same strike and expiration,which ensures that you can profit either way, provided that the stock moves explosively; the Synthetic Call ensures that you’re insured if the stock falls, counter toyour bullish expectations.The Straddle can be made less expensive by adjusting the call and put strikesout of the money to create a Strangle. Because strangles are cheaper and your costbasis is lower, you stand to make bigger percentage returns if the stock movesexplosively.The other strategies in this section are “nice-to-haves,” but they rarely form partof my trading arsenal, so don’t worry unduly about them.
Volatility Strategies
Volatility Strategies StaircaseThis diagram shows how the various volatility strategies link together, highlightingtheir similarities and differences. You may want to complete the chapter first beforecoming back to this diagram so that you can better appreciate the links.
Straddle
buy OTMstrikes
buy more putsthan calls
buy ITMstrikes
Strangle
Guts
otherstrategies
Volatility
Strip
StrategiesShortButterfliesStaircase
buy more callsthan puts
ShortCondors
Strap
4.1 StraddleProficiency
Direction
Volatility
Asset Legs
Intermediate
Neutral
High
■ Long Put
Max Risk
Max Reward
Strategy Type
Uncapped
Capital Gain
!
Capped
■ Long Call
4.1.1 DescriptionThe Straddle is the most popular volatility strategy and the easiest to understand.We simply buy puts and calls with the same strike price and expiration date so thatwe can profit from a stock soaring up or plummeting down. Each leg of the tradehas limited downside (i.e., the call or put premium) but uncapped upside.Assuming that the movement of the stock is enough to cover the cost of the trade,we should be profitable.
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However, we also need to apply various rules when trading straddles. The problem with buying options includes time decay and the Bid/Ask Spread. Time decayhurts long options positions because options are like wasting assets. The closer weget to expiration, the less time value there is in the option. Time decay acceleratesexponentially during the last month before expiration, so we don’t want to holdonto OTM or ATM options into the last month. We also do not want to be buyingand selling the same Straddle too frequently because typically the Bid/Ask Spreadis quite wide, and if we continually buy at the Ask and sell at the Bid when the stockhasn’t moved for us, then the spread will cause us to lose.So we must have a number of reasons for getting in, staying in, and then gettingout. We also need to know that the price that we’re paying for the Straddle is reasonable in comparison to the propensity the stock has to making a significant move.In other words, the cheaper the cost of the Straddle, the better, provided that thestock is one that can and will move explosively.Here are the rules for trading straddles:1. My personal preference is to choose stocks over $20.00, preferably no morethan $60.00. That’s not to say that you can’t make profits from stocks outsideof that range; it’s simply my own comfort zone.2. Only do a Straddle on a stock that is close to making an announcement, suchas the week before an earnings report.3. Buy ATM calls and puts with the expiration at least two months away, preferablythree. You can get away with four months if nothing else is available.4. The cost of the Straddle should be less than half of the stock’s recent high lessits recent low. By recent, we mean the last 40 trading days for a two-monthstraddle, the last 60 trading days for a three-month straddle, or the last 80 daysfor a four-month straddle. The point here is that the cost of the Straddle shouldbe low in comparison with the potential of the stock to move.5. Exit within two weeks after the news event occurs. Try to avoid holding theposition during the final month before expiration. In the final month, optionssuffer from accelerating time decay, which would therefore erode our position.6. Try to find a stock that is forming a consolidation pattern, such as a flag orpennant, or in other words, where the stock price action has become tighter andwhere volatility has shrunk in advance of a big move in either direction. Youshould familiarize yourself with the basics of technical analysis at the very least.It’s important to follow the entry and exit rules for straddles, and psychologicallyspeaking, the Straddle is a tough strategy to play after you’re in. It’s very easy tofind reasons to exit, even though it’s in breach of your trading plan. But you mustremember that you got in for a certain reason (or reasons), and you must stay inuntil one of your other reasons compels you to exit.
Buy ATM put
Buy ATM call
Straddle
Volatility Strategies
Steps to Trading a Straddle1. Buy ATM strike puts, preferably with about three months to expiration.2. Buy ATM strike calls with the same expiration.Steps In■
Actively seek chart patterns that appear like pennant formations, signifyinga consolidating