How To Profit From Big Moves In Equities
We’ve seen our share of market volatility over the past few weeks. Political posturing led to the government shutdown in October and a close encounter with the US debt ceiling.
However, market volatility isn’t the only kind of volatility out there. Individual equities can also be volatile for very different reasons than the overall market.
The most obvious example of stock-specific volatility comes around every earnings season. There are always plenty of companies that surprise investors and cause the shares to gap – higher or lower.
Here’s the thing…
There are many circumstances where investors expect a company to surprise the markets. Earnings can be very unpredictable – especially with growth companies or businesses that have launched new products or services.
The trick is guessing which direction the shares will move after the surprise.
But why guess? Why not use options to bet on a big move, regardless of direction?
In fact, using options to profit from large equity moves is quite simple. All you need to do is buy a straddle.
By definition, a straddle is a strategy where the investor has a position in both a call and a put at the same strike and expiration date for an underlying instrument.
So far example, if Microsoft (MSFT) is trading at $37 per share, then buying an at-the-money (ATM) straddle would consist of buying the 37 call and 37 put for the same expiration month.
The straddle is a commonly used, popular strategy for options traders. It’s an easy way to profit from big moves in equities without having to choose a direction – and of course, it can make you lots of money. As a matter of fact, with a straddle, the upside is unlimited.
However, straddles can be risky if you don’t know the proper way to trade them. In order to maximize your success rate using straddles, you need to understand the rules of straddle trading.
Knowing and understanding the three rules of straddle trading can unlock the strategy’s unbelievable upside potential.
So what are the rules?
As a matter of fact, I’ve just released a brand new report, Three Secrets For Profitable Straddle Trading. I think you’ll find this report highly informative. And of course, you’ll get in-depth discussion of the three straddle trading rules. Go ahead, and follow the link to check it out.
Yours in Profit,
Gordon Lewis
Category: Breaking News
