Weekly Recap FEB 23, 2025

How was your weekend? Did you get outside in nature? I did, for some reason I thought it sounded fun to go trek up some of the biggest hills in town, on the uncleared snow covered paths of course, wearing big heavy boots…. Now that its over I’m proud of the accomplishment, it was no joke
What did Hemingway say? “You have to live it, before you can tell it”

Right now we’re all living with a hard time in the markets, and a very very veryyyyy uncertain one too

With Options there’s a strategy I mentioned on Friday called “Straddles”
And right now after Fridays drop, and no clear direction in sight, these could prove to be highly valuable. Without having to pick a stocks direction, in times of volatility like we have now these can be “Money Making Machines”
Today I am going to share::
A: What they are
B: When to use them
C: How they work

My plan is to teach those that that are “Beginner day #1, what is an Option?”
To:: “Hey, Wall Street is calling, they want you”

Straddles are known as a “Delta Neutral” strategy since the Calls and the Puts are at the same Strike for the same EXP
They are most often used for earnings plays, and scheduled announcements
They do not require the investor to pick a direction on either side, all we want is for price to move outside of our “Pin” to then take us ITM
Why they may prove beneficial right now is simple, prices are moving, the enemy of buying a Straddle is if price stalls , that is not good for the buyer, only the seller or “writer”
We don’t know if prices will continue to fall, or if they will shoot back up, slow crawl or stay in place
Our bet is that prices will continue to move rapidly here in one direction or the other and we’re looking to capitalize as we protect our investments

Lets say our stock XYZ is trading at $100.00
The Call at that $100.00 strike costs $5.00
The Put for that $100.00 strike costs $5.00
We are now paying $10.00 for our Straddle
In textbook terms we then want the price of our stock to move below $90.00
Or move above $110.00
The price of the Calls and the Puts will most likely never be exactly even
Investors should be mindful of that to ensure that they never get “lopsided”
That would occur if the investor paid $10.00 for the Call and only $1.00 for the Put
If they did that and the stock went south, ruttttttt rohhhhhhh, not good
Reverse that for the long side
The Deltas however should be close to 0.50 or very even on both sides

If XYZ shoots up or down, we will go ITM on one side, and OTM on the other
It is then if the investor has a bullish, or bearish sentiment they may choose to drop the Strike that is OTM for larger profits. They should remain clear that they are then going “Naked” or “Blind” and should the stock reverse it could be beneficial to lock in gains at that time

Now lets really step it up a notch. Straddles are not an every day type of strategy and these next 2 plays are reallyyyyy old skool

Strap
A Strap is when you add to the long side of the Straddle
Lets say an investor is bullish, they may want to have 6 Calls and 5 Puts

Strip
A Strip is when you add to the short side of the Straddle
Lets say an investor is bearish, they may want to have 6 Puts and 5 Calls

Should the stock move the investors way they could drop the opposing side if they plot to move forward. They would then be deeper ITM because they used a “Ratio” that went their way
That is obviously for the more advanced
That’s like “Fun on top of fun at Funland” ….Yes I just made that one up 😁 
Like I said earlier, these can be “Money Making Machines”

Trader Tip
Because Straddles are capital intensive the investor doesn’t want to get caught stuck between breakeven prices
And the time aspect in respects to Theta….. For these it may be constructive to exit before the halfway date to EXP if the trade is OTM. Remember the investor is not selling anything here to offset costs like we do with Bull Call Spreads, only buying on both sides
Again, we are looking at these for large movements to come, up or down, just not stalled sideways
When buying Straddles the safest play is to buy ATM and always at the MID
We here at theoptionscoach.net always buy at the MID

AMZN
APR 17, 2025
Straddles at the 220 are 24.48 at the MID

META
APR 17, 2025
Straddles at the 685 are 62.10 at the MID

MSFT
APR 17, 2025
Straddles at the 410 are 27.03 at the MID

WMT
APR 17, 2025
Straddles at the 95 are 6.14 at the MID

SFM took a major blow this week and is now back down at the bottom of its long term channel. That drawdown alone didn’t make it a candidate here, it didn’t fit our 17 point checklist

Side Note:::
Starting this coming Friday FEB 28, 2025 I won’t be working / writing for about a week, maybe 10 days
The Sun is shining the snow is melting, I’m going to head back out and hit some hills

The Options Coach