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Straddle - Option
Strategy
The straddle
is a position that occurs when buying or selling one call option
and
one put
option
at same strike price and expiration. Straddes are
used when there a belief there there will be
a stirring in the market
however which way is unclear.
Types of straddle that exist:
The long straddle - has to do with buying both a long call and
a long put, normally
at
the
money,
with the same strikes and expiry. There needs to be volatility
(either up or down) if a profit is to be realized.
The Short Straddle - having both a short call and a put, with
the
same
strikes and expiry. Employed when the trader feels the market will not experience
much movement. If large movements ensue, the trader can incur especially large
losses.
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