A THREAD
Topic: Why triple straddle has no real benefit.
A triple straddle is essentially an ATM Straddle & one or two step away straddle on either side. The position is almost neutral strategy just like any other neutral straddle or strangle.
1/
We can also view the position as an ATM straddle, a strangle & inverted strangle.
For example
Nifty: 14700
Triple straddle: 14600,14700,14800
Another view:
14700 straddle
14800-14600: strangle
14600-14800: Inverted strangle
2/
So the real question is what is the advantage of an inverted strangle over it's otm counterpart?
The answer is none.
They both have same premiums/theta. Only that slippages will be high in inverted strangle when we do the required adjustments plus liquidity issue.
3/
So isn't it better that instead of a triple straddle, we can just do ATM Straddle & 2* OTM strangle.
So in the above eg. the position will be
14700 ATM straddle
2* 14800-14600 otm strangle.
Same premium received, similar range just that there's no nuisance of ITM options.
4/
The question arises:
Why trade in an ATM straddle & 2* OTM Strangles? Why over-complicate?
Options are in itself a complicated instrument. Wouldn't it be better to stick to one straddle or a strangle & adjust accordingly?
Lesser the strikes, more there will be clarity.
5/