Best Stocks for Straddle Trades

Lower volatility expectations is good news for options buyers

Senior Quantitative Analyst
Mar 20, 2019 at 6:30 AM
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The Cboe Volatility Index (VIX) is down nearly 50% from the beginning of the year. It’s the biggest year-to-date drop at this point in the year in the history of the "fear index" (data back to 1990). In other words, volatility expectations are way down since the beginning of 2019. This is good news for options traders, because it means option prices have come down a lot. If you’re an options trader looking for ideas, this will be a good article for you. This week, I’m listing stocks with options that have tended to yield positive returns over the past couple of years.

The Straddle Signal

To determine stocks that have had attractive options, I calculated returns on long straddles since 2017. A long straddle consists of buying a call option and a put option on a stock. The call and put should have the same strike and expiration date. This essentially takes direction out of the equation, as the position can profit whether the stock goes up or down. The stock move, though, must be bigger than simply buying a call or put because it must be enough to cover both premiums that you bought.

Profitable Straddle Plays

The data below assumes you purchased an at-the-money straddle a little over a month before expiration. This time frame is analogous to currently purchasing a straddle that expires on Thursday, April 18. It assumes you held it through expiration and closed it at intrinsic value.

Going by the average straddle return, the table below shows the top 25 stocks for straddle plays since 2017 (using this method). I also show the median straddle return, the percent that were positive, and the percent which would have doubled your money. The last column shows the percentage of the positive straddles that were positive due to the call option. In other words, of all the positive straddles, it’s the percentage that were positive due to an increase in the stock price, as opposed to a decrease in the stock price. These stocks were much more volatile than what option players had priced in.

IotW straddle highest avg return

Below is another list of 25 stocks that were good straddle plays over the past couple of years. These are stocks that had the highest percent positive. These stocks wouldn’t have earned you the most money with their straddles, but they turned out winners more consistently than others.

IotW straddle highest percenage

Finally, here is a list of stocks with straddles that doubled most often. These stocks had options that were most likely to give you a big winner.

IotW straddle highest double

 

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213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
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101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

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