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From Theory To Practice

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2/13/18: Portfolio Analysis - Inverting a Short Straddle

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

In today’s portfolio analysis, we offer up a detailed analysis of the XLU adjustment we made earlier. The position was a Short Straddle that was slightly underwater, and all we did was simply roll it out to the next expiration cycle. This adjustment alone improved our basis on the trade and widened out our break-even points. However, we could have gone inverted on the trade, too, by possibly moving our call down from the 51 strike to the 48 strike. In today’s segment, we walk through what that adjustment might have looked like.

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