{"product_id":"stcov266exyo","title":"Stocks \u0026 Commodities V. 26:3 (62): Explore Your Options by Tom Gentile","description":"Explore Your Options by Tom Gentile\u003cbr\u003e\u003cbr\u003eSIZING UP A STRADDLE BUY\u003cbr\u003e\u003cbr\u003eI was looking at a particular stock for a\npossible straddle. The company is expected\nto release earnings in 10 days.\nSuppose I intend to purchase options\nthat have 50 days left until expiration.\nAccording to my calculations, the\nstraddle can be initiated for a debit of\n$400 ($2.00 for the put and $2.00 for\nthe call), which is also my maximum\nrisk. If I intend to hold this trade for\nonly 10 days, would 5% of my account\nsize be a prudent amount to risk? For\nexample, if my account size is $10,000,\nI can only do one contract straddle if I\nwas holding the trade close to expiry,\nbut I can do more if I was only holding\nit for only 10 days. Am I right? The risk\nis less if my time frame is 10 days\ninstead of 50?\u003cbr\u003e\u003cbr\u003eYour question brings up some important\nfactors that should be considered\nwhen evaluating a potential straddle: time\ndecay, implied volatility, and maximum\nrisk. The straddle, as you know, includes\na put and a call on the same stock. Both\nputs and calls have the same strike price\nand the same expiration months. The\nidea is for the stock to make a big move\nhigher or lower. If it rallies, the call can\nbegin to yield profits if it increases\nenough in value (in this case, $4.00 or\nmore). If the stock tanks, the puts increase\nin value and can provide the profits.\nA big move in the near future is the\nbest-case scenario.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133906809201,"sku":"\\V26\\C03\\052EXPL.PDF","price":2.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_54835fda-7b74-40c9-a454-f7df86c325af.jpg?v=1739656416","url":"https:\/\/shop.traders.com\/products\/stcov266exyo","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}