Continuing from Part II of this Long Straddle Option Trading series Long Straddle Option Trading Profit & Loss Calculation, here are the tips to enter and exit Long Straddle Option positions
Tips to enter the Long Straddle Option Trading Position:
An option trader should enter the Long Straddle Option Trading Position with the following tips:
- In expectation of any big news or event which might lead to a big movement in the underlying stock price

- Keep a long enough time to expiry (atleast 3 months) else you will get hurt severely by the options time decay

- Pickup highly volatile stocks which are expected to show large swings in prices

- Look for event like earning reports, project bidding outcome, research reports outcome, court cases outcome for the company, patent related decisions, and so on

Tips to exit Long Straddle Option Trading Position:
An option trader should exit the Long Straddle Option Trading Position with the following tips:
- If the expected event has occurred and there is no price movement as expected with passage of time, an option trader is advised to book losses and exit unless there is another event expected with more than 1 month to expiry

- Don't close both the positions (Call and Put) at the same time, if the expected movement has happened. Say if the stock price has risen from $50 to $80, sell the call but keep the put. If the stock price has declined from $50 to $20, sell the put and keep the call. Usually, after some time there is a price retract and the other option may also be worth more if you hold it.

- Don't hold the Long Straddle till the last month of expiry. Exit it as soon as it enters the last month of expiry as time decay will hurt badly.

- Keep an eye on implied volatility - if it is going down, then it will be bad for long straddle option position. Exit the position if there are no clear signs about any big price movements in near future and the implied volatility is low

Let's now see the Greeks for Long Straddle Option Position