"Straddle" on the Yen. Can we make money on this?

8 août

The Japanese yen option market bet on Straddle.
A "Straddle" is a type of options strategy that aims to profit from market volatility regardless of the direction of price movement. In simpler terms, a Straddle involves buying both a call and put option with the same strike price, creating a neutral position.
This type of strategy can generate profits if the market moves in either direction, but the profits are not realized immediately, rather, they occur after the market has passed certain price points. It is highly recommended that you read ourarticle published on TV for further understanding.
Despite the fact that examples are provided in post from stock market, where Straddles are more common, the principles and mechanics of this strategy are applicable to all markets.

So, on August 6th, a significant Straddle option portfolio was listed on the Chicago Mercantile Exchange (CME). The boundaries of this portfolio, which are indicated on the provided chart, represent reasonable entry points for the portfolio owner. Based on observations, the price tends to bounce off these boundaries. Therefore, these boundaries can be used to enhance our trading strategy. For trading in the direction of the current trend, of course! Not contr-trend!

Let's see if we can get a signal at the border and open up a position.

17 août

Note

The Straddle boundary was hit and we saw a perfect rebound. It seems like the Straddle (again) worked well and helped us open a short position in line with the current trend. The move from the boundary to the profit side was over 160 points so far, so we take the trade to breakeven. Nice. We entered the downtrend with a short trade with sniper precision and are already at breakeven right now.
But here's the question: could we have entered the market for the downside without the help of options at this point? So, were there any patterns or graphical models for opening the short? Don't think so, but there is a hint on the chart . Take a look at the chart (screenshot with the "quote compression level" marked 2). Is there a liquid zone? Oh yeah. The market's looking for liquidity. Was the trader aiming for this area when trading the Straddle? Probably, yes.
When it comes to options trading with hundreds of thousands of dollars at stake, it's not a game of guessing. There's always a plan, and profi approach. More importantly, after selling futures at the Straddle's border, the x-trader has a break-even Syntethic Position even if prices continue to go wrong scenarion direction.