Summary: Strategies with undefined risk will generally provide a better win rate and a higher probability of success compared to their defined risk counterparts. However, one drawback to these strategies is that they have a higher capital requirement and can not be placed in an IRA! Due to this limitation, a number of high probability strategies that we use around earnings can not be placed in a retirement account. In order to get around this limitation, we can buy a cheap out of the money (OTM) call to define our risk and create a similar position. By doing this, is it possible to place a straddle in an IRA to take advantage of the high implied volatility that accompanies earnings announcements? Today, Tom Sosnoff and Tony Battista see how buying a cheap OTM call to define their risk on a straddle compares to a standard straddle. The guys find out that using lower priced underlyings, buying the call reduces your overall profit but your win rate stays exactly the same!
