SlideShare a Scribd company logo
1 of 4
Download to read offline
What is straddle?
A straddle is an options trading strategy that involves purchasing both a call option and a put option
with the same strike price and expiration date. The straddle strategy is employed when an investor
expects a significant price movement in the underlying asset but is uncertain about the direction of that
movement.
Here's how a straddle works:
Components of a Straddle:
Call Option: This gives the investor the right (but not the obligation) to buy the underlying asset at a
specified strike price before or at the expiration date.
Put Option: This gives the investor the right (but not the obligation) to sell the underlying asset at a
specified strike price before or at the expiration date.
Same Strike Price and Expiry:
In a straddle, both the call and put options have the same strike price and expiration date. For example,
if an investor believes a stock is going to experience significant volatility but is unsure about the
direction (up or down), they might execute a straddle by buying both a call and a put option for the
same stock with the same strike price and expiration date.
Profit Potential:
The straddle strategy aims to profit from the anticipated volatility. If the price of the underlying asset
moves significantly in either direction (up or down), one of the options (either the call or the put) will
become profitable, offsetting the loss on the other option. The goal is to make more in profits than the
combined cost of purchasing both options.
Risk:
The risk in a straddle strategy is primarily the cost of purchasing both the call and put options. If the
price of the underlying asset does not move significantly, and volatility remains low, both options may
expire worthless, leading to a loss.
Breakeven Points:
There are two breakeven points in a straddle:
Upper Breakeven: The stock price at which the profits from the call option offset the total cost of the
straddle.
Lower Breakeven: The stock price at which the profits from the put option offset the total cost of the
straddle.
Volatility Impact:
Straddles benefit from an increase in volatility. The more significant the price movement in the
underlying asset, the higher the potential profits.
Traders often use straddles when they anticipate a major news event, earnings announcement, or other
situations that could lead to significant price movements. However, it's essential to be aware of the
costs involved and the potential risks, as well as the fact that the price movement needs to be
substantial enough to cover those costs and generate a profit.
LTP Calculator
LTP
Supercharge your stock market strategy with the LTP Calculator – your go-to
investment companion! Enjoy real-time insights, fingertip precision, and unrivaled
reliability. Our user-friendly tool makes complex calculations a breeze, providing
crystal-clear Last Traded Price (LTP) values. It's free to access – just enter your
stock symbol and make informed decisions on the spot. Thanks to advanced
algorithms, the LTP Calculator ensures you stay ahead of the curve. Don't wait –
click now to revolutionize your stock market approach!
LTP Calculator is available on play store here is link –
https://play.google.com/store/apps/details?id=com.ltpcalculator.android
If you want to learn stock market then you can learn stock market from India's
best stock market trainer Vinay Prakash Tiwari, who is the founder of Investing
Daddy and has provided training to millions of people.
Please upvote and follow me if you thought this was useful. I'm really grateful
for your support!

More Related Content

Similar to What is straddle.docx

Buying Options on Futures Contracts - A Guide to Uses and Risks
Buying Options on Futures Contracts - A Guide to Uses and RisksBuying Options on Futures Contracts - A Guide to Uses and Risks
Buying Options on Futures Contracts - A Guide to Uses and RisksCannon Trading Company
 
Summer training @ jainam shares consultancy ltd
Summer training @ jainam shares consultancy ltdSummer training @ jainam shares consultancy ltd
Summer training @ jainam shares consultancy ltdMohit Jariwala
 
Options.pptx
Options.pptxOptions.pptx
Options.pptxasde13
 
Real options, acquisition valuation and value enhancement
Real options, acquisition valuation and value enhancementReal options, acquisition valuation and value enhancement
Real options, acquisition valuation and value enhancementBabasab Patil
 
Market Strategies Using Options
Market Strategies Using OptionsMarket Strategies Using Options
Market Strategies Using OptionsNavin Bafna
 
“Commodity Treading & Future Option Maker”
“Commodity Treading & Future Option Maker”“Commodity Treading & Future Option Maker”
“Commodity Treading & Future Option Maker”Vatsal Patel
 
Binary Options Trading Strategies | Best Trading Strategies for Binary Options
Binary Options Trading Strategies | Best Trading Strategies for Binary OptionsBinary Options Trading Strategies | Best Trading Strategies for Binary Options
Binary Options Trading Strategies | Best Trading Strategies for Binary OptionsSteve Roberts
 
Derivatives of Capital marketsCcm derivatives videoshoot
Derivatives of Capital marketsCcm derivatives videoshootDerivatives of Capital marketsCcm derivatives videoshoot
Derivatives of Capital marketsCcm derivatives videoshootLearning Imarticus
 
Meetup 2-options-single legstrategies
Meetup 2-options-single legstrategiesMeetup 2-options-single legstrategies
Meetup 2-options-single legstrategiesAmit Shanker
 
Trading Essentials.pdf
Trading Essentials.pdfTrading Essentials.pdf
Trading Essentials.pdfnorilynPusa
 
25 proven-strategies-for-trading-options
25 proven-strategies-for-trading-options25 proven-strategies-for-trading-options
25 proven-strategies-for-trading-optionsPranjal Chopda
 
Mechanics & properties of options
Mechanics & properties of optionsMechanics & properties of options
Mechanics & properties of optionsAmeya Ranadive
 
Options Trading Strategies
Options Trading StrategiesOptions Trading Strategies
Options Trading Strategiesluv_sharma
 
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdf
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdfpresentation_ppt-_on_derivativs_1456575867_96262 copy.pdf
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdfPriyankaPillai22
 

Similar to What is straddle.docx (20)

Buying Options on Futures Contracts - A Guide to Uses and Risks
Buying Options on Futures Contracts - A Guide to Uses and RisksBuying Options on Futures Contracts - A Guide to Uses and Risks
Buying Options on Futures Contracts - A Guide to Uses and Risks
 
Summer training @ jainam shares consultancy ltd
Summer training @ jainam shares consultancy ltdSummer training @ jainam shares consultancy ltd
Summer training @ jainam shares consultancy ltd
 
Options.pptx
Options.pptxOptions.pptx
Options.pptx
 
Real options, acquisition valuation and value enhancement
Real options, acquisition valuation and value enhancementReal options, acquisition valuation and value enhancement
Real options, acquisition valuation and value enhancement
 
Market Strategies Using Options
Market Strategies Using OptionsMarket Strategies Using Options
Market Strategies Using Options
 
“Commodity Treading & Future Option Maker”
“Commodity Treading & Future Option Maker”“Commodity Treading & Future Option Maker”
“Commodity Treading & Future Option Maker”
 
Binary Options Trading Strategies | Best Trading Strategies for Binary Options
Binary Options Trading Strategies | Best Trading Strategies for Binary OptionsBinary Options Trading Strategies | Best Trading Strategies for Binary Options
Binary Options Trading Strategies | Best Trading Strategies for Binary Options
 
Straddle Options
Straddle OptionsStraddle Options
Straddle Options
 
Derivatives of Capital marketsCcm derivatives videoshoot
Derivatives of Capital marketsCcm derivatives videoshootDerivatives of Capital marketsCcm derivatives videoshoot
Derivatives of Capital marketsCcm derivatives videoshoot
 
Meetup 2-options-single legstrategies
Meetup 2-options-single legstrategiesMeetup 2-options-single legstrategies
Meetup 2-options-single legstrategies
 
Trading Essentials.pdf
Trading Essentials.pdfTrading Essentials.pdf
Trading Essentials.pdf
 
25 proven-strategies-for-trading-options
25 proven-strategies-for-trading-options25 proven-strategies-for-trading-options
25 proven-strategies-for-trading-options
 
Mechanics & properties of options
Mechanics & properties of optionsMechanics & properties of options
Mechanics & properties of options
 
Derivatives
DerivativesDerivatives
Derivatives
 
DERIVATIVES MARKET
DERIVATIVES MARKETDERIVATIVES MARKET
DERIVATIVES MARKET
 
Options Trading Strategies
Options Trading StrategiesOptions Trading Strategies
Options Trading Strategies
 
SECTION IV - CHAPTER 28 - Options
SECTION IV - CHAPTER 28 - OptionsSECTION IV - CHAPTER 28 - Options
SECTION IV - CHAPTER 28 - Options
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
 
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdf
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdfpresentation_ppt-_on_derivativs_1456575867_96262 copy.pdf
presentation_ppt-_on_derivativs_1456575867_96262 copy.pdf
 
Option Pricing.pptx
Option Pricing.pptxOption Pricing.pptx
Option Pricing.pptx
 

Recently uploaded

原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证
原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证
原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证jdkhjh
 
Call Girls In Yusuf Sarai Women Seeking Men 9654467111
Call Girls In Yusuf Sarai Women Seeking Men 9654467111Call Girls In Yusuf Sarai Women Seeking Men 9654467111
Call Girls In Yusuf Sarai Women Seeking Men 9654467111Sapana Sha
 
Unveiling the Top Chartered Accountants in India and Their Staggering Net Worth
Unveiling the Top Chartered Accountants in India and Their Staggering Net WorthUnveiling the Top Chartered Accountants in India and Their Staggering Net Worth
Unveiling the Top Chartered Accountants in India and Their Staggering Net WorthShaheen Kumar
 
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...makika9823
 
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawl
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service AizawlVip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawl
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawlmakika9823
 
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdfBPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdfHenry Tapper
 
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...Suhani Kapoor
 
Bladex Earnings Call Presentation 1Q2024
Bladex Earnings Call Presentation 1Q2024Bladex Earnings Call Presentation 1Q2024
Bladex Earnings Call Presentation 1Q2024Bladex
 
Lundin Gold April 2024 Corporate Presentation v4.pdf
Lundin Gold April 2024 Corporate Presentation v4.pdfLundin Gold April 2024 Corporate Presentation v4.pdf
Lundin Gold April 2024 Corporate Presentation v4.pdfAdnet Communications
 
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办fqiuho152
 
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130Suhani Kapoor
 
Q3 2024 Earnings Conference Call and Webcast Slides
Q3 2024 Earnings Conference Call and Webcast SlidesQ3 2024 Earnings Conference Call and Webcast Slides
Q3 2024 Earnings Conference Call and Webcast SlidesMarketing847413
 
fca-bsps-decision-letter-redacted (1).pdf
fca-bsps-decision-letter-redacted (1).pdffca-bsps-decision-letter-redacted (1).pdf
fca-bsps-decision-letter-redacted (1).pdfHenry Tapper
 
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证rjrjkk
 
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdf
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdfmagnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdf
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdfHenry Tapper
 
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptx
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptxOAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptx
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptxhiddenlevers
 
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escorts
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur EscortsCall Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escorts
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escortsranjana rawat
 
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance Company
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance CompanyInterimreport1 January–31 March2024 Elo Mutual Pension Insurance Company
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance CompanyTyöeläkeyhtiö Elo
 
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best Services
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best ServicesMulki Call Girls 7001305949 WhatsApp Number 24x7 Best Services
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best Servicesnajka9823
 
SBP-Market-Operations and market managment
SBP-Market-Operations and market managmentSBP-Market-Operations and market managment
SBP-Market-Operations and market managmentfactical
 

Recently uploaded (20)

原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证
原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证
原版1:1复刻堪萨斯大学毕业证KU毕业证留信学历认证
 
Call Girls In Yusuf Sarai Women Seeking Men 9654467111
Call Girls In Yusuf Sarai Women Seeking Men 9654467111Call Girls In Yusuf Sarai Women Seeking Men 9654467111
Call Girls In Yusuf Sarai Women Seeking Men 9654467111
 
Unveiling the Top Chartered Accountants in India and Their Staggering Net Worth
Unveiling the Top Chartered Accountants in India and Their Staggering Net WorthUnveiling the Top Chartered Accountants in India and Their Staggering Net Worth
Unveiling the Top Chartered Accountants in India and Their Staggering Net Worth
 
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...
Independent Lucknow Call Girls 8923113531WhatsApp Lucknow Call Girls make you...
 
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawl
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service AizawlVip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawl
Vip B Aizawl Call Girls #9907093804 Contact Number Escorts Service Aizawl
 
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdfBPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
BPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
 
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...
VIP Call Girls LB Nagar ( Hyderabad ) Phone 8250192130 | ₹5k To 25k With Room...
 
Bladex Earnings Call Presentation 1Q2024
Bladex Earnings Call Presentation 1Q2024Bladex Earnings Call Presentation 1Q2024
Bladex Earnings Call Presentation 1Q2024
 
Lundin Gold April 2024 Corporate Presentation v4.pdf
Lundin Gold April 2024 Corporate Presentation v4.pdfLundin Gold April 2024 Corporate Presentation v4.pdf
Lundin Gold April 2024 Corporate Presentation v4.pdf
 
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办
(办理原版一样)QUT毕业证昆士兰科技大学毕业证学位证留信学历认证成绩单补办
 
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130
VIP Call Girls Service Dilsukhnagar Hyderabad Call +91-8250192130
 
Q3 2024 Earnings Conference Call and Webcast Slides
Q3 2024 Earnings Conference Call and Webcast SlidesQ3 2024 Earnings Conference Call and Webcast Slides
Q3 2024 Earnings Conference Call and Webcast Slides
 
fca-bsps-decision-letter-redacted (1).pdf
fca-bsps-decision-letter-redacted (1).pdffca-bsps-decision-letter-redacted (1).pdf
fca-bsps-decision-letter-redacted (1).pdf
 
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证
原版1:1复刻温哥华岛大学毕业证Vancouver毕业证留信学历认证
 
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdf
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdfmagnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdf
magnetic-pensions-a-new-blueprint-for-the-dc-landscape.pdf
 
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptx
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptxOAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptx
OAT_RI_Ep19 WeighingTheRisks_Apr24_TheYellowMetal.pptx
 
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escorts
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur EscortsCall Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escorts
Call Girls Service Nagpur Maya Call 7001035870 Meet With Nagpur Escorts
 
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance Company
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance CompanyInterimreport1 January–31 March2024 Elo Mutual Pension Insurance Company
Interimreport1 January–31 March2024 Elo Mutual Pension Insurance Company
 
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best Services
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best ServicesMulki Call Girls 7001305949 WhatsApp Number 24x7 Best Services
Mulki Call Girls 7001305949 WhatsApp Number 24x7 Best Services
 
SBP-Market-Operations and market managment
SBP-Market-Operations and market managmentSBP-Market-Operations and market managment
SBP-Market-Operations and market managment
 

What is straddle.docx

  • 1. What is straddle? A straddle is an options trading strategy that involves purchasing both a call option and a put option with the same strike price and expiration date. The straddle strategy is employed when an investor expects a significant price movement in the underlying asset but is uncertain about the direction of that movement. Here's how a straddle works: Components of a Straddle: Call Option: This gives the investor the right (but not the obligation) to buy the underlying asset at a specified strike price before or at the expiration date. Put Option: This gives the investor the right (but not the obligation) to sell the underlying asset at a specified strike price before or at the expiration date. Same Strike Price and Expiry: In a straddle, both the call and put options have the same strike price and expiration date. For example, if an investor believes a stock is going to experience significant volatility but is unsure about the direction (up or down), they might execute a straddle by buying both a call and a put option for the same stock with the same strike price and expiration date. Profit Potential: The straddle strategy aims to profit from the anticipated volatility. If the price of the underlying asset moves significantly in either direction (up or down), one of the options (either the call or the put) will become profitable, offsetting the loss on the other option. The goal is to make more in profits than the combined cost of purchasing both options.
  • 2. Risk: The risk in a straddle strategy is primarily the cost of purchasing both the call and put options. If the price of the underlying asset does not move significantly, and volatility remains low, both options may expire worthless, leading to a loss. Breakeven Points: There are two breakeven points in a straddle: Upper Breakeven: The stock price at which the profits from the call option offset the total cost of the straddle. Lower Breakeven: The stock price at which the profits from the put option offset the total cost of the straddle. Volatility Impact: Straddles benefit from an increase in volatility. The more significant the price movement in the underlying asset, the higher the potential profits. Traders often use straddles when they anticipate a major news event, earnings announcement, or other situations that could lead to significant price movements. However, it's essential to be aware of the costs involved and the potential risks, as well as the fact that the price movement needs to be substantial enough to cover those costs and generate a profit. LTP Calculator LTP Supercharge your stock market strategy with the LTP Calculator – your go-to investment companion! Enjoy real-time insights, fingertip precision, and unrivaled reliability. Our user-friendly tool makes complex calculations a breeze, providing crystal-clear Last Traded Price (LTP) values. It's free to access – just enter your stock symbol and make informed decisions on the spot. Thanks to advanced
  • 3. algorithms, the LTP Calculator ensures you stay ahead of the curve. Don't wait – click now to revolutionize your stock market approach! LTP Calculator is available on play store here is link – https://play.google.com/store/apps/details?id=com.ltpcalculator.android If you want to learn stock market then you can learn stock market from India's best stock market trainer Vinay Prakash Tiwari, who is the founder of Investing Daddy and has provided training to millions of people.
  • 4. Please upvote and follow me if you thought this was useful. I'm really grateful for your support!