Atlas® dome watch in stainless steel and 18k rose gold, mechanical movement. - $499.00 : TITLE, SITE TAGLINE


A Straddle is a neutral options trading strategy that involves buying a call option and a put option at the same strike price. A straddle is a neutral options strategy because it's profitability is independent of the direction of any movement in the underlying stock.

Long Straddle

A trader establishes a long straddle by simultaneously purchasing a put option and a call option at the same strike price and expiration date. A long straddle profits from an increase in implied volatility and any substantial move in the price of the underlying asset. As with any long strategy, a long straddle suffers from the effects of time decay. If the price move in the underlying occurs over a long period of time or the move is not large enough the position will be a loss at expiration.


Short Straddle

A trader establishes a short straddle by simultaneously selling a put option and a call option at the same strike price and expiration date. A short straddle is a bet that implied volatility will decrease or that the price of the underlying will not move substantially during the life of the options. If the price of the underlying asset increases or decreases quickly during the life of the option then the position will incur a loss. Otherwise the profit will be equal to the amount of premium collected when the position is established.

Stock + Short Straddle

If you want to own a stock, you can combine the purchase with a short straddle to purchase the stock at a discount. Suppose you purchase 100 shares of MSFT at $25 and then sell one $25 Call and one $25 put, 6 months out, for about $2.50 each. The premium received on the option sales reduces your cost basis in the trade by $5. So you pay net $20/share instead of $25. If MSFT is higher at expiration, the stock will be called away from you at $25 for a 25% gain. If it is lower at expiration, you will be put 100 additional shares at $25, for a net cost basis of $22.50/share, a 10% discount on today's price. For stocks with higher implied volatility, the gain or discount is even greater.

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki