Ask the Crew:
Crew members tackle questions submitted by readers each month

Q: Could you explain how money is made on straddles and strangles? They seem like they would just cancel each other out and break even no matter what the stock does.

A: As one side gets deeper in the money the delta strengthens. As the other side gets further out of the money the delta weakens. In other words, one side gains much faster than the other side loses.

Q: My trading platform does not have a list of earnings dates. It is only on individual charts. Is there a free source for a list of earnings dates?

A: Yes, go to There is an earnings calendar, free of charge. (Direct link to page: http:// )

Q: Can you explain why one would want to be slightly delta short on the forward ratio spreads? Why not delta neutral or slightly delta positive? I’m not sure that I understand the logic. Also, what is an acceptable amount of delta upon entry of the trade and does this number need to be maintained throughout the life of the position? (Just to clarify the “slightly negative delta”… If I cap the trade with a long call on the upside, can I assume that delta (which will be small) gets factored into the entire delta count for the position, which I am trying to maintain at 0.01-0.05 negative delta upon entry… correct?

A: You can approach it in two ways.
1- You simply do not factor in the delta of the bought call and go into the trade fully expecting to lose whatever you paid for the call.
2- You factor it in and manage the sold call as you move your trade down. I favor option one.

Q: Novice question! How do I go short when I don’t have a big account? Do I buy puts? I thought being short meant selling puts or calls?

A: Yes! Puts are how we go directional to the downside.

Q: How do you evaluate a good “forward spread” candidate? Can this be done on an index?

A: You could do it on an index, but I favor doing it on a stock that has a big spike in Implied Volatility.

Our goal is to cover ground that will benefit the entire community…so get busy sending in those questions…

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