1. Smiling Straddle Strategy Refinements #1
By Ken Hodor
12/12/12

2. Recap on XSProfits.com
Previous Smiling Straddle Presentation on 5/19/12

3. Overview Which Short Straddle Strike to pick?
Compare returns vs other strategies
Compare various expiration dates

4. SPY Straddle Analyze Tab

5. Which Strike to pick?
Let’s explore the Jan 2013 strikes from 6/1 till present
$140
$142
$145
$148
$150

6. Jan ‘ Strike

7. Jan ‘ Strike

8. Jan ‘ Strike

9. Jan ‘ Strike

10. Jan ‘ Strike

11. 145 Strike
140 Strike
135 Strike

12. Premium Various Strikes

13. Various Strikes vs. Time

14. VIX

15. Mike’s analysis

16. Composite Straddle P&L

18. WOW !

19. Incremental
(Straddle Difference/Days Difference)
WOW !

23. What about AAPL?
Current Price 528

24. Observations SPY strikes on $5 boundaries higher liquidity
Selling practically any straddle makes money
Implied Volatility moves price dramatically
So interim P&L shifts
However the end P&L does not change
Longer-term Implied Volatility less dynamic
The VIX has been dropping since June

25. Conclusion
As price moves, layer new straddles to take advantage of volatility shifts
Ladder straddles—much like CDs
Put in place purchase puts or calls (weekly or monthly) to deal with sudden price shifts. The “Smile” protection part of this strategy.