List of Financial Market Terms

A Straddle, used in options trading, is a strategy where the investor holds a position in both a call and put with the same strike price and expiration date for the same underlying asset. 

Buying a Straddle offers a Trader the opportunity to profit off a move to the upside or downside. Max gain is theoretically unlimited and max loss is the price paid to enter the spread. 

Here's a visual of a long Straddle:

buying a strangle options spread

Selling a Straddle offers a Trader the opportunity to profit when the underlying stays in a specified range.  Max gain is the credit obtained for selling the spread.  Max loss is theoretically unlimited.

Here's a visual of a short Straddle:

shorting a straddle options spread

 

Related terms: Butterfly Trading Pattern, Strangle Option, Delta Option, Gamma Option, Theta Option, Vega Option

 

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