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Am a beginner in option trading. Recently started learning option strategies. The long straddle looked particularly appealing. However to make a profit the underlying needs to move, lets say around 2%. Is there any technique by which we can reduce this gap down to 0.5% range?

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A long straddle gains value if implied volatility increases and/or the underlying moves away from the strike price. It loses value due to double sided time decay. Those are its dynamics.

You can reduce the 2% threshold by:

  • using lower IV options (less chance of a big move)
  • buying nearer term expiries (disadvantage of higher rate of theta decay)
  • utilizing defined risk strategies that have a cap (butterfly, iron condor)
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    Each strategy has its own risk profile. Google for info about the differences between each one and choose the one that best fits your outlook for the stock. Jun 7 at 16:01
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Thank you Bob for quick response. Tried and compared different strategies and came up with this one. Please comment.

A

C

B

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    As I mentioned above, choose the strategy that best fits your outlook for the stock. If this one meets your criteria, then all is good. For me, the 6:1 risk/reward ratio would be a non starter. Jun 8 at 19:10
  • Bob could you kindly take a look at the strategy i posted here: [money.stackexchange.com/questions/97441/… can its theta value be made positive. Thank you.
    – Martin
    Jul 3 at 12:11

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