Trading Strategies
What is Straddle?
Buying both a call and put at the same strike price to profit from large moves.
📖 Complete Definition
A long straddle involves buying a call and a put with the same strike price and expiration. It profits when the stock makes a large move in either direction, greater than the combined premium paid. It's used when you expect high volatility but are unsure of direction. Short straddles (selling both) profit from range-bound markets.
💡 Examples
- →Buy $100 call and $100 put for combined $5 premium
- →Stock must move above $105 or below $95 to profit at expiration
❓ Frequently Asked Questions
When should I use a straddle?
Use long straddles before events when you expect large moves but are uncertain of direction. Ensure IV isn't already inflated, which would increase breakeven points.
🔗 Related Terms
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