Straddle

Straddle is one of the key option strategies used when the market is neutral waiting for its breakout/stay in this condition. Its essence lies in the simultaneous buying/selling call and put options on one asset with same strikes.

This option strategy is not limited to the use of a single option as in call and put options, when the profit is made from the unidirectional price movement. Nevertheless, often there are situations in which there is no definite trend in the market, when it would be possible to say confidently in what direction the asset price is likely to move further. In this case, the simultaneous buying call and put options can become a very attractive strategy. The portfolio formation that contains the positions allowing an investor to make profit during both market increase and fall gives him great opportunities to earn profit in the market. The feature of these combinations is the purchase of options with same strikes.

That is, in anticipation of a sharp price movement in one direction or another after the breakout of the price range (often flats or triangles), in which the price has been for a long time, an investor looks at the market simultaneously in both directions, that is, he uses the long straddle option combination. At the same time in the expectation that the price will stay in this price range for some time, an investor will benefit from the short straddle strategy.

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