Favoring Calendars over Straddles in Current Market?

[PaulCao]

Hi, 

 

So I took a look at the SO's model portfolio and saw that it is 100% allocated to calendars, 

 

Which is great because I love selling premium, 

 

However, I know that Kim used to trade lots of earning straddles and was curious why we haven't traded more straddles lately esp. given how VIX had a lot of crush back to 12. 

 

Perhaps it's because I have bias towards selling premium, but I get nervous about being too short vega; so I get more relaxed when the portfolio has also balancing trades like straddles that will hedge the loss, if the market does go sharply in one direction or another, 

 

I remember Kim used to do some long-term earning straddle, like buy MSFT or CSCO one month or two month prior to earnings; there'll be small losses piling up on those straddles but the thesis was that they are hedges and also bought very cheap when VIX is low, 

 

So just wanted to ask whether we are doing more calendars just because it's been more successful this year or if the performance with straddles have been more mixed, 

 

Best,

PC

 

 

[Kim]

I still would like to do straddles, but all straddles I looked at have been very expensive lately. Now with VIX back to 12, we hopefully will be able to find some suitable candidates.

[luxmon]

Good straddle candidates have been tough to find lately.  I did open MSFT July4 46 straddle on June 24th for 2.46 since it has moved a lot leading to earnings the last few cycles.  The position is down to 1/5th the original size as I peeled off options on the winning side to stay delta neutral rather than rolling.  I'm currently break even on the trade so it's been a tough road to hoe but it has provided some hedge protection along the way.