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Searching for the short-straddle edge
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FOT-December 2008-4
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The difference between implied and actual volatility offers an advantage for selling straddles on the S&P 500.
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Detailed Description
Options strategies that appear risky have the potential to be safer than a simple buy-and-hold approach, especially over long periods.
As evidence, let’s compare the historical performance of the short straddle, which contains one short at-the-money (ATM) call and one short ATM put, to the performance of the S&P 500 index tracking stock (SPY) over the past 16 years.
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