Only six equities saw positive straddles on average
Options have been more popular lately than ever before. This increase in volume is largely attributed to the rise in 0DTE options, which stands for zero days to expiration, and consists of buying an option that expires that same day after the market closes.
In this article, however, I’m focusing on a longer holding period of four weeks. I’m listing stocks with options that have tended to be mispriced by some metric. While the market in general has chopped around for some time, I’ll focus on stocks that have made enough directional movement for attractive option returns.
Finding Stocks with Mispriced Options
To determine which stocks have had attractive options, I calculated returns on four-week straddles since 2022. A straddle consists of buying a call option and a put option on a stock, usually with the same strike and expiration date. This takes direction out of the equation because the position can profit whether the stock goes up or down. The stock move, however, must be bigger than simply buying a call or put option, because it must be enough to cover both premiums that you bought.
Profitable Straddle Plays
The data below considers S&P 500 Index (SPX) stocks that have weekly option expiration dates available for trading. It assumes you purchased a straddle at the end of every week that had an expiration date four weeks away, and that you held the straddle until expiration and closed the position at intrinsic value.
Going by the average straddle return, the first table shows the top 20 stocks for straddle plays since 2022. It also shows the percentage that were positive, and which would have doubled your money. The last column shows the percentage of 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.
Based on this, the best stock for trading options since 2022 was Nucor (NUE), with weekly straddles that would have yielded over 30% per trade. The options were positive mainly due to positive price movements, as 73% of the positive straddles were due to an increase in the stock price. Of the 20 stocks on the list, only six were mainly positive due to stock price increases. Most stocks, like Meta Platforms (META), had positive option returns due to poor stock performance.
Below is another list of 20 stocks that were good straddle plays since 2022. These are stocks that had the highest positive percentage. These stocks wouldn’t have earned you the most money with their straddles, but they turned out to be winners more consistently than others.
Kimberly-Clark (KMB) heads the list with 62% of straddles positive. Looking at a chart of KMB shows it has chopped around a lot since 2022, with shares down overall by about 10%. The stock hasn’t stood still for too long, trending ferociously up or down, or even gapping one way or the other. This is what makes for positive option plays.
Finally, here is a list of stocks that had their straddles doubled most often. These stocks had options that were most likely to give you a big winner.
