Long Straddle – Free Trade Idea
Every Friday we give you a free options trade idea identified by Option Party. Today, we’re focusing on the long straddle.
There is an attractive long straddle trade in ISHARES BARCLAYS TIPS BOND (TIPS). It is currently trading at $114.24.
There is a 30.8% chance the stock will close above 117.01 or below 111.49 on 06-16-2017, and you will earn your target return of $25,542.90. There is a 88.4% chance the stock will close above 114.81 or below 113.19 on 06-16-2017, and you will earn a profit. Since this strategy has an uncapped reward potential, you can earn more than the target return should the stock move strongly either up or down. There is a 1.6% chance the stock will close between 113.89 and 114.11 on 06-16-2017, and you will have a total loss of $9,517.05.
Note that in actuality you cannot have a total loss unless the stock closes exactly at 114.00 on 06-16-2017, but we count the stock ending within 0.1% of 114.00 as a total loss.
To enter this position you will buy 117 call option(s) and 117 put option(s) with a 114.00 strike price. Both the calls and the puts will have an expiration date of 06-16-2017. This trade will require a net debit of $0.80, and the commission for this trade will be $157.05.
All information presented here is current as of 06/09/2017 2:40 pm EST. All trading involves risk. Free trades ideas are presented for illustrative purposes only and are not to be construed as financial advice.
How Did We Do? The Results…
This trade employed a Long Straddle strategy that needed TIPS to close above $114.81 or below $113.19 on June 16, 2017 to earn a profit. The stock closed at $113.68 and resulted in a loss of $5,773.05.