The Options Course – High Profit and Low Stress Trading Methods : [PDF Download]

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“The benefit to trading a long synthetic straddle is the adjustments that can be made. As the stock moves up and down, we can adjust the trade back to delta neutral to lock in profits. Many traders make adjustments when the total delta of the trade is up or down 100.

We can make these adjustments by selling or buying stock or by selling or buying the options. This strategy is a great long-term tool, but make sure you understand the risks before entering this type of trade. Used appropriately, the nondirectional strategies reviewed in this chapter can be nice profit producers, without a lot of risk.

However, it is important to understand the basic rules and to know the associated risks. As with any strategy, a risk graph should always be created before entering the trade. When you put on a long synthetic straddle, you are placing a hedge trade.

All you are paying for is the cost of the options. If your broker requires you to have margin on the stock side, then try to find someone who will give you a cross-margin account. There are companies out there that offer cross margining, although it is a relatively new concept to the public.

Putting on a synthetic straddle is not new; just the concept of looking at it as a low-risk trade from the brokerage firm side is new.”

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