Straddle
High profits if the price rises or falls sharply during the period of holding
Last updated
High profits if the price rises or falls sharply during the period of holding
Last updated
The Straddle is a strategy that helps you to make a bet on a volatility rise: that the price of an asset will soon increase or fall (any direction). The Straddle consists of a call option and a put option with the same strike price and the same expiration.
Instead of being bullish or bearish about the future price, you can have the following reasoning when buying it: “I don’t care what the price will be, but if it changes significantly in either direction during the period of holding the Straddle, I win.”
The Straddle has a limited cost and unlimited potential profit.
Buying one Straddle is equal to buying two ATM options - one ATM call and one ATM put.
