Bryan recently emailed us and asked about “chicken option trades.” He said we could post his email and Rick’s reply. We hope you find it informative. Rick – I’m looking for someone to teach me more about options trading. I heard about the “chicken trades” and that you can almost have a “for sure” gain even as the other is losing. But I haven’t even got my feet wet on options, so I need some advice. I’m not a pro at trading either, but have made some money and lost about as much in the process. I held too long and sold too fast on some. These were my biggest mistakes. I came across the idea of trading options by attending one of those trading seminars.   Anyway, I have a cash account with a broker if that explains more of what I have going on. How do I set up an options trade? I hear about a date it will expire? A strike price and so on? I’m looking for basics, just the chicken option. How far up and down from what price should I be looking at? Whatever you’ve got that you’re willing to show. Help me get my feet wet on this. I’ll subscribe by the end of the week. – Bryan #### Dear Bryan, A “chicken trade” is basically a “straddle” option trade.  You are correct about how they work, but what those seminars DON’T show you are how the option premiums (price) can be vastly different even if two stocks are trading at the same price!   That is in itself another subject, but back to the straddle trade.   Let’s look at AIG which was a trade I just profiled as a similiar trade.   AIG closed Tuesday at $36, down $9.  You could have entered a September 45 put and a September 45 call on Monday when the stock was at $45.  Here is where the big moves are made and this is the type of action you are looking for when looking for chicken trades.   Of course, there is much more to it than that, but this is the strategy.   As far as entering a trade, most brokers or online brokers have it set up so you can enter a straddle trade without doing two different transactions.   Don’t rush into anything – especially this kind of advanced option trade!  Do paper example trades until you feel comfortable with them. I don’t cover these types of trades on a regular basis, but every once in a while I may.  In any event, I think we can help you with your questions. That’s why I’m here.  It would be great if you came on board with us. – Rick]]>