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How Many Days to Expiration When You Buy a Spread
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ticker lesson
Breakdown
0:00lesson
DTE for buying vs selling spreads
- Buying spread vs selling spread directional trade
- DTE affects spread price response
- Shorter DTE = faster price response
- Longer DTE = less sensitive to stock price changes
- Choose DTE based on confidence in directional bias
2:15lesson
Earnings premium and straddle performance
- Micron beat implied in 9/16 reports
- Straddle paid in 7/15 cases
- Earnings premium not mispriced in liquid stocks
- Volatility not mispriced in active stocks
- Straddles/strangles risky around earnings
4:00lesson
Straddle vs stock movement
- Straddle requires stock to beat implied
- Market says stock will move X, trader says it will move more
- Straddle is betting stock will move beyond implied
- Straddle is losing if stock doesn't move beyond implied
- Straddle is not a reliable strategy
6:17lesson
Strangle cost and strategy
- Strangles expensive at $1,000 stock levels
- Retail accounts find strangles costly
- Avoid selling naked puts in high-priced stocks
- Buy defined risk strategies like butterflies
- Don't assume you know more than the market
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