Straddling the Fence

Why this trade? From my perspective it seems quite futile to pick a direction for the market given the uncertainty surrounding events in Europe. With that in mind, I go into the mode of wanting to straddle the fence.

Up, Down. I don’t care. Just go one way, and when you do, move big.

To pay for this trade however, I pick a direction for January by selling the downside PUT in SPXU (ProShares Ultrashort S&P 500). What this means is that I see some downside in the not too distant future so I expect SPXU to rise in price.

In the meantime, I want to play for a big move this week or early next week (the December contracts expire on 12/17).

3 thoughts on “Straddling the Fence

  1. A good question. In the case of this SPXU trade, I own the straddle for December – paid for by the sale of the Jan 13 PUT.
    So, if I find that the trade continues to favor the Dec PUT next week – I simply excercise on Friday and let the Jan holder call it away next month if need be.
    From my perspective, downside protected so all Reward at this point.
    Does that answer your question?

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