Mark
You are spot on the analysis that VIX predicted non event employment event.
The straddle is now 18 USD. How do you assess that the straddle was relatively cheap?
Thanks
Ron
Ron,
Great question, in this case I did a risk reward analysis in my head. If I buy a straddle into the employment report for 20 dollars or so, how much am I really putting at risk? Probably about 200 dollars a straddle, at the worst (assuming I am diligent about taking straddles off when they don’t work, which I am). The only scenario where I lost is what happened. In all other scenario's which I thought had at least a 50& chance of happening I broke even, or made a killing. Thus, it wasn't a difficult decision. One thing traders should note it’s not always about IV; sometimes traders pay more attention to the actual price of the straddle.
With the VIX dropping into the 17's and my wife going into labor I bought a blind long SPX FEB 1145 straddle purchased for 50.10. Considering FEB is a long cycle, has a lot of earnings announcements, I thought it would be fun to see what happens with IV's this low. When I get back I will run through how I might have managed the position if I was scalping the gamma.
Hope you all have a great trading week, wish me luck.
Mark
