So today I began research on an options trade called a 'long strangle'. Hopefully this refers to the position of my trade and not the position I end up in. So with a fairly basic overview of a daily RIMM chart (using the thinkorswim software) it seemed that this would be a good stock to try the trade on. I tend to stick with well known stocks, but I also look for big swings that are fairly consistent.
So with about 15 minutes to close, the stock had opened at 89.96 and was up to 94.53, and here are the details...
Bought +10 RIMM (feb 08 exp) 95 strike call @ $5.65 = $5650 + $24.95 = $5674.95 total
Bought +10 RIMM (feb 08 exp) 90 strike put @ $3.80 = $3800 + $24.95 = $3824.95 total
My overall goal is generally a 20-30% profit overall, but since I have zero experience with the 'long strangle', I really have no idea what to expect. I am not entirely sure what to do if one side of the position profits, but not enough to cover the other side. With the volatility that has become common in the last few months, I am very curious what exit strategies will emerge.
Since I am very new to this, I would enjoy hearing any thoughts, opinions, or experience on the subject of the 'long strangle'.
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