Why straddles around news usually fail
Posted: Mon Nov 02, 2026 6:02 pm
Why straddles around news usually fail
The idea sounds smart: place a buy stop above and a sell stop below the price a minute before the release, and catch the move in whichever direction it goes. An OCO setup, one cancels the other.
Reality is less kind. Spreads widen before the news, so the pending orders sit near a market that is moving against them. Orders can trigger on the spread alone. Price spikes through one side, fills at a poor price, then reverses and hits the other side, resulting in two losses.
There is also the matter of slippage. Stop orders become market orders at the trigger, and in a thin, fast market they fill far from the intended level. The trade starts with a deficit before anything has happened.
Brokers also sometimes widen the minimum distance for pending orders during news, so the orders cannot be placed where intended.
Traders who still use straddles tend to place them wide, use small size, and accept that a lot of attempts will lose. The ones who succeed usually have a very specific edge in a particular release and have measured it thoroughly.
A more sensible variant is placing a single pending order after the first spike settles, in the direction of the post-spike drift, with a stop beyond the extreme of the move. It removes the double loss scenario and the worst of the slippage.
What happened the last time a straddle was tried around a major release?
The idea sounds smart: place a buy stop above and a sell stop below the price a minute before the release, and catch the move in whichever direction it goes. An OCO setup, one cancels the other.
Reality is less kind. Spreads widen before the news, so the pending orders sit near a market that is moving against them. Orders can trigger on the spread alone. Price spikes through one side, fills at a poor price, then reverses and hits the other side, resulting in two losses.
There is also the matter of slippage. Stop orders become market orders at the trigger, and in a thin, fast market they fill far from the intended level. The trade starts with a deficit before anything has happened.
Brokers also sometimes widen the minimum distance for pending orders during news, so the orders cannot be placed where intended.
Traders who still use straddles tend to place them wide, use small size, and accept that a lot of attempts will lose. The ones who succeed usually have a very specific edge in a particular release and have measured it thoroughly.
A more sensible variant is placing a single pending order after the first spike settles, in the direction of the post-spike drift, with a stop beyond the extreme of the move. It removes the double loss scenario and the worst of the slippage.
What happened the last time a straddle was tried around a major release?