free option strategy

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.

OPPORTUNITY

There is an attractive long straddle trade in ISHARES BARCLAYS MBS BOND (MBB). Currently it is trading for $107.18.

CHARACTERISTICS

There is a 30.9% chance the stock will close above 110.96 or below 103.39 on 07-21-2017, and you will earn your target return of $16,694.10. There is a 87.9% chance the stock will close above 108.16 or below 105.84 on 07-21-2017, 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 1.1% chance the stock will close between 106.89 and 107.11 on 07-21-2017, and you will have a total loss of $6,982.95.

Note that in actuality you cannot have a total loss unless the stock closes exactly at 107.00 on 07-21-2017, but we count the stock ending within 0.1% of 107.00 as a total loss.

ENTRY PLAN

To enter this position you will buy 60 call option(s) and 60 put option(s) with a 107.00 strike price. Both the calls and the puts will have an expiration date of 07-21-2017. This trade will require a net debit of $1.15, and the commission for this trade will be $82.95.

DISCLAIMER

All information presented here is current as of June 23, 2017 10:467 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 MBB to close above $108.16 or below $105.84 on July 21, 2017 to earn a profit. The stock closed at $107.10 and resulted in a loss of $6,982.