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songlake68

Trade hedged straddles/strangles without the hedge legs ( removing the option selling legs)

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Hi Kim

I am a new member and would like to apply your trades in my TFSA and RRSP accounts.

After I got a membership this morning, I quickly reviewed all the trades you posted in

https://steadyoptions.com/forums/forum/10-steadyoptions-trades/

It seems that you use much less unhedged straddles/strangles than before:  

Before Feb 2015, 65% of your trades were unhedged straddles/strangles. After Feb 2015, the percentage dropped to 26%.

In 2018, until now, you made about 100 trades. There were only 17 trades were unhedged straddles/strangles.

(Please see the attached Excel spreadsheet for these percentages.)

 

My questions are:

1.      Does that mean you think the risk/profit of unhedged straddles/strangles is not attractive anymore? If yes, what is the reason?

2.      If not, may I apply those hedged straddles/strangles without the hedge legs (removing the option selling legs)? If that works, I can do half of your trades in my reg accounts - it is still OK. If that does not work, that means I can do only 17% of your trades in my reg accounts - too less. 

 

Thank you!

 

Book1.xlsx

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@songlake68 I would recommend reading the "Must read topics" on the right side of the main forum page.

Specifically, Short Strangles topic presents the case why we use the short strangles to hedge our straddles. The main idea is to reduce the risk by trying to offset the negative theta of the straddles, which also allows us to open those trades much earlier than we used to, and to do more trades. In some cases opening straddle only would work better than straddle only (like the latest MSFT and BUD trades), but it also increases the risk.

Those strangles are not naked - they are covered by the straddles, so I don't see why they cannot be used in TFSA and RRSP accounts

 

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I asked IB and they said no. I cannot short straddles in my TFSA even they are covered by long straddles. Here is their email:

 

No, as there is no trading on margin in TFSAs. Please refer to the permitted trading permissions below:

TFSA Trading Permission

No trading on margin - all purchases must be paid in full in respective currencies; No account debit allowed. If needed, currency trade could be executed between USD & CAD.

Accounts are restricted to cash balances in CAD and USD.

TFSA is allowed to trade the following qualified investments:

Stocks listed on designated US and Canadian exchanges (excluding Venture-NEX segment and CSE single listed stocks)
Long equity call options
Long equity put options
Short equity call options with a fully covered position (covered call)
Long equity put options with a fully covered position (protective put).
Long put/call options on indices.
Warrants/Rights if the underlying asset acquired under the right to purchase is a qualified investment.
U.S. Bonds.
FX conversions limited to USD/CAD

For further information on TFSAs, please refer to the following link: LINK../index.php 
Should you have any other inquiry, feel free to reply via this ticket.

Best regards,

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