Strangle What Did I Do Wrong

#1

Darrell,

Today i tried to set up a strangle in Gbp/USD considering the volatility that i know would come because of the news.

So at 2am edt i bought 3 binaries 40 pips above current price at the time and sold 3 40 pips below. I bought at 20 and sold at 76. Also i placed orders do buy back at 56 and sell at 43.

At the end of the day, i win on the buy side, but profited only 4 bucks, that were totally consumed by fees, and ended up with a negative balance.

Please 1. what i did wrong? Was it the price of the entry?

  1. Cant i try to buy my binaries for the next day releases at the rollover time? I mean knowing that the market will move (cause atr says to and deviations too) 40 pips to one side or the other, cant i buy just after rollover two binaries 40 pips from price at low cost, lets say 10 in buy and 90 sell, both at 11 am expiration, and just wait for the time to come?

  2. At what time these binaries (11am) become available to buy and when is the best time to buy them for a news event?

  3. When is the time of the day that they tend to be cheaper? IS that such a time or it depends of how far the price is from them? Knowing that eu and gu always go 100 pips in a day, at rollover time cant i always try and get 2 binaries 40 pips away from price at eu and gu for a cheap price?

Thanks

Rodrigo Samico

#2

You knew what your net profit would be before you got in. The risk reward was not good so you should not have taken the trade.

Are you using our news trade plan?

Have you watched the news strangle and news straddle videos.

Straddles are better than strangles.

11 am binaries become availble at 12 pm - also intraday at 9 am - but that does not mean they are the best binaries - refer to the news plan

the closer to expiration the cheaper they are - they will get more expensive about 15 minutes before the news

the news at most should take 2 hours to move and in reality usually 30 minutes so you don’t need to buy at 3 am on 11 am expiration for a news report that comes out at 4:30 am

always is a strong word - and not accurate - this is not viable, as basically you should be about break even if you buy the range of the market up/down, if you exit when it hits it, based on pricing models for options

Hope this helps feel free to ask further questions

Darrell

#3

Ok Darrell i got it. My RR was flawed. Thats why i am still on demo :wink:

Thanks Rodrigo

#4

Cool - also again spreads are better than binaries for news breakouts

#5

This risk is based of both buy and sell for 1 contract, correct?

Max Risk combined EURUSD 100.00% 50 100 $ 75.00

#6

My 2 cents - think of it as risk per straddle, not per contract.

The risk per straddle is based upon the ratio of long and short spreads.

If the ratio is 1, then simply divide the total risk by number of spreads on 1 side. If the total risk = $36, and the ratio is 3/3, then the straddle risk = $36/3 = $12.

If the ratio is not 1, then express the ratio of spreads as a proper fraction (Numerator < Denominator). Multiply the total risk by that fraction. That is the risk per straddle.

For example, if there are 2 short spreads of $7 each and 3 long spreads of $5 each, then straddle risk = ((2 X $7) + (3 X $5)) X 2/3 = ($14 + $15) X 2/3 = $29 X 2/3 ~ $19.33.

#7

Yes basically max risk for minimum.position

No matter the ratio

#8

I assumed that in order to determine the true total risk that the straddle should be reduced to the least common multiple of spreads.

[quote=darrell]Yes basically max risk for minimum.position

No matter the ratio[/quote]

#9

Was for other readers I know yiu have this mark :slight_smile: