Most "experts" warn against the short straddle because it leaves the deriviative seller at risk of unlimited losses. While this is true, a key element added to this strategy can create a virtually risk-free profit machine. We observe this same phenomenon with various compounds. For example, Hydrogen combined with the element Oxygen (ratio of 2:1) creates water. The most stable and a most essential compound to our existence. In like manner, combining a short straddle with money management and a semi-martingale twist can create a stable and essential income stream.
More specifically, if after entering the short straddle (on stocks or currency pairs or futures), immediately set the stops (stop loss) at break-even for the calls and puts. Thereafter if it call or put reaches break-even, then the specific option is closed and a new short straddle is created.
Walt
More specifically, if after entering the short straddle (on stocks or currency pairs or futures), immediately set the stops (stop loss) at break-even for the calls and puts. Thereafter if it call or put reaches break-even, then the specific option is closed and a new short straddle is created.
Walt