Straddle

Straddle Strategy

High profits if the price rises or falls sharply during the holding period.

The Straddle is a strategy for betting on increased volatility — that the price of an asset will soon move significantly in either direction. The Straddle is made up of a call option and a put option with the same strike price and the same expiration.

When buying a Straddle, the reasoning is:

“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 profit potential.

Buying one Straddle is equal to buying two ATM options: one ATM call and one ATM put.