Feedback desired on a US 500 Straddle I traded

#1

Greetings. I am a newbie to Apex and Nadex and have taken the basic courses for binaries, spreads and the scanner. I decided to apply what I learned so far by entering into a demo day trade spread on the US 500- 8/15/16@ 23:00. My strategy was to do a straddle trading the news for 8/16/16. Both the CPI and New Housing Starts. While my expectations for CPI were flat, I was expecting positive news for New Housing starts and a nice corresponding upward move on the S&P 500. The reports came out as expected but what I was unaware that the NY Fed Pres was going to give a hawk talk which excited the yield on bonds and neutralized securities for any significant rally. Doing a post mortem when all was said and done, I earned a gross profit of $210 on the trade. Anyhow, I will include the specifics of the trade and then my questions:

Upper Spread: ( 2190.0 - 2230.0) bought 10 contracts at 2191.0 Cost = $100 Lower Spread: ( 2150.0 - 2190.0) sold 10 contracts at 2181.3 Cost = $870 Total investment= $970 Underlying: 2183.25

Market opened and it went south and from what I could see was pretty much flat all day. I closed my shorts for 2178.2 at 09:42 with a settlement of $1180. Not even 15 minutes into the day session I was out. From my understanding of straddles I bought the upper spread close to the floor and sold the lower spread close to the ceiling.

Question 1: Did I structure the straddle correctly? Question 2: True or false: With the underlying at 2183.25, I bought above the market therefore paid a premium of $7.75 per contract? Question 3: With the underlying at 2183.25, I sold below the market did I capture premium or lose it? Question 4: True or false: With a straddle it’s best to buy below market and sell above the market. Question 5: Typically which are better to use for the US 500, Iron Condors or Straddles?

Any help is appreciated and thank you in advance for you time and attention

Best regards, Alex

#2

Hey Alex, Anytime you are doing straddles you will be PAYING premium, not collecting premium. You will buy above the market and sell below the market. That is why with straddles you have to make sure the expected move will be at least 150% of your risk. With straddles, you are expecting a big move, just not sure which way it will go , so you are both buying and selling to be able to take advantage of the larger directional move. You have a low risk usually, but you are paying for “insurance” as it were when you are using those close to the floor / ceiling spreads that way. You are looking to make what you can off the actual tick movement.

To collect premium, you would be doing an Iron Condor. This is when you DON’t expect a large move, or expect it to stay flat ro retrace to around the same level. This is here you are actually selling the upper, not buying. And buying the lower spread not selling. it is the opposite of strangle.

Notice in the news calendar we suggested an Iron condor on that trade day due to historical moves, So make sure to check out the news trade plan. You asked which is better for US500. It is not an issue about which is best for what instrument, it all has to do with the expected move of the news event, not the actual instrument. Does that make sense?

#3

It sure does make sense! Thanks so much for the feedback! I appreciate it very much! I have been studying and practicing my brains out and have to say I am loving it! So far I have been doing really good with binaries and okay with spreads. The more I understand spreads however, the more I am loving them especially that they are not “all or nothing” propositions like binaries are. Thanks again!

Best regards, Alex