Why has this thread been inactive. I am going to try the strategy. It appears good. Is there an issue with it? Please let us know if there is a problem
Unlike gambling on stocks, futures or on naked options - it's a good neutral strategy! :rofl:
However, like everything else, it also has a drawback - Implied Volatility (IV) is a friend and a foe at the same time.
By default, a strangle or straddle will neutralize Mr. Delta's anger.....
So, if one buys a strangle/straddle and IV increases, Lady Vega will make money for you but if IV subsides or decreases she will unleash her wrath. Here, Mr. Theta is against the buyer at all times.
Similarly, if one sells a strangle/straddle and IV decreases, Lady Vega will generously pay but if IV increases she will again unleash her wrath. Here, Mr. Theta is with the seller at all times.
Thus, it is incorrect to say - without analysis - the strategy is a SureShot win-win unless you are looking for a bumpy ride!
If you find any Volatility edge do let us know........