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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, 2021 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.

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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, 2021 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, 2021 at 12:11

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