Straddling stop hunters

[Schopen]

Is it possible to buy and ATM call and put whose contract lifetime covers, say, an FOMC release date, and close each leg off as dealers fade aggressively up and down?

I'm thinking of FX markets which is where I will dip my toes one day.

I say ATM if the pair is ranging prior to the release, and buy them then. Is this too obvious and will implied vol take this into consideration? I'm viewing this as a safer alternative to trading manually (i.e., no stops) with the dealers.

 

[Martinghoul]

Is it possible to buy and ATM call and put whose contract lifetime covers, say, an FOMC release date, and close each leg off as dealers fade aggressively up and down?

I'm thinking of FX markets which is where I will dip my toes one day.

I say ATM if the pair is ranging prior to the release, and buy them then. Is this too obvious and will implied vol take this into consideration? I'm viewing this as a safer alternative to trading manually (i.e., no stops) with the dealers.

It's been done... To death, if I might put it this way.

Firstly, the vols price this in. Secondly, you're going to spend a fortune making sure that your straddle is ATM when the moment of truth finally arrives.

Something that people do sometimes is put orders in to 'straddle' the mkt. That, for all the obvious reasons, is a risky activity.