One thing I learned with the 1:1 balanced short straddle is that as the SP drops and the -c/-p are rolled down, cash is released from the CSP, which I was then using to buy more shares. For example, rolling down $10 from 240 to 230 released $1000/contract (allowing me to buy ~4-5 shares if appropriately timed). I did this a couple times, rolling out weeks as well. Now, I’m overweight CCs vs CSPs and as the SP rises, I must inject cash back into the CSPs at $1000/contract for every $10 SP rise and straddle roll. If the SP rise is ONLY $10/wk it should be no problem staying ahead of the rise and rolling out. Unfortunately, a faster rise means I must let some CCs go and sell CSPs (likely at lower strikes than ATM).
I know this is simple and intuitive, but I just hadn’t thought through the mechanics of SP rise on straddles. Originally, they were ATM around $250, but the SP has dropped so much that, even with rolling down, they are slightly OTM high. If the SP rockets back above $250 this week, I won’t have enough cash to roll the CCs out and back CSPs at 250. Thus, I must roll out at lower strike CSPs, losing the ATM premiums as my CSPs fall off the wheel. This will convert the $230 straddles to something like $230/$250 strangles. Not a terrible problem, perhaps even a bit easier to roll (or expire the puts), but something that I had not really thought about as I kept buying stock with my free cash.
The past month I’ve really enjoyed having 10x more free cash in the accounts than normal, (even though the “total value” has dropped dramatically with SP). Now, as the SP rises (hopefully), I will enjoy the total value balance rising, while fretting about the lack of free cash and trying to roll the strikes higher. First world problems.
FYI, decided to try the short straddle method because I can’t seem to time the market, guess the direction correctly, or understand why the SP has dropped below $350-$400. Everything seems upside down or backwards. Hopefully this isn’t too much of a lousy method since the shares/funds are in retirement accounts and I will eventually need the money (maybe 5-10 years).