Options - Straddle

RECENT NEWS
Shocked Investor  Jun 29 
Australian Colin Twiggs writes today about Fedex (FDX) Twiggs says: " FDX failed to follow-through below $50 (after breaking support at $52), rallying strongly to test the upper border of a gently descending trend channel. Twiggs Money Flow...
Shocked Investor  Jun 24 
The European Central Bank announced today that it will lend a record E$442B at an amazing 1% interest rate. It is its biggest allotment ever. "The loan represents about 70 percent of the ECB's outstanding liquidity operations and 5 percent of euro...
Shocked Investor  Jun 22 
Today we start a new month of options, and with that, come the best option trading opportunities. Oil and Natural Gas Oil and Natural Gas are prime candidates for straddles and strangles. UCO is at 12.50, right in the middle of strikes. UNG is...
Shocked Investor  Jun 19 
Fox News reports that the US is sending a destroyer to intercept a North Korean ship suspected of carrying nuclear cargo. Whether this is just irresponsible reporting or whether sparks do indeed fly over the weekend, stocks are still significantly...
Shocked Investor  Jun 15 
The current crisis and unemployment rate will cause bad loans. Some companies that have done well recently, too well, are prime targets for these bad loans. The chart below shows options strangles to Capital One (COF), and American Express (AXP)...
Zero Hedge  May 18 
Not only is the market bouncing like an schizophrenic yoyo, but the vol in the VIX seems to also be now drawn to the market's sociopathic magnetism. Whoever has been buying straddles on the VIX has been making buck. When is iShares coming out with...
Shocked Investor  Apr 30 
Earnings straddles for this week are doing quite well on average. So far we have 5 winners, (ETFC, UA, SI, TWC, WYN) and 1 loser (SQM). SQM is really as good conservative company. It is a good buy, perhaps not so good for short-lived straddles. We...
Shocked Investor  Apr 23 
For tomorrow we have Amazon as the biggest attraction. It is currently trading around $80. Since we have so many days still until expiration, an attractive play would be an 85-75 strangle. Here are the maximum moves and prices as of 1:50PM. A...
Guerilla Stock Trading.com  Apr 21 
Scottrade will only let me do one put or one call per stock symbol. The problem is that I want to play the Nasdaq in a straddle and to do that I need to play two different stock symbols representing the Nasdaq. I want to play QQQQ and NDAQ with a...
Shocked Investor  Apr 20 
Oil is down significantly today, USO rollover is s till a safe 2+ weeks away, and UCO is trading exactly at $7.50, at a perfect spot for straddles and strangles. Oil as of 10:15AM: Here are UCO May straddles and strangles and that maximum...
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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.

[edit] 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.

[edit] Payoff

[edit] 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.

 
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