"The SPY May $155 straddle—which entails buying puts and calls with strike prices equal to the price of the associated security—was so expensive that the stock market would have to rise or fall some 7% or more for the straddle to be profitable.
When a straddle is too expensive, or you want to risk less money, strangles are usually a viable alternative.
The strangle entails buying puts and calls with strike prices above and below the associated security's price. Well, the strangle didn't offer big savings compared with the straddle. This shows that the options market expects stocks to make a sharp move, up or down, during earnings season—and the move is priced into both put and call prices."
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When a straddle is too expensive, or you want to risk less money, strangles are usually a viable alternative.
The strangle entails buying puts and calls with strike prices above and below the associated security's price. Well, the strangle didn't offer big savings compared with the straddle. This shows that the options market expects stocks to make a sharp move, up or down, during earnings season—and the move is priced into both put and call prices."
Click here to read the full article