   13: The Straddle Strategy Strategy: Straddle Opening the Trade: 1. "Buy to open" a put option on company X and 2. "Buy to open" a call option on company X at the same strike and expriation as the put Summary: This is called a Straddle, because you profit if the stock moves in either direction, but lose money if it stays the same. This is also sometimes called a non-directional play, because you are betting on the volatility of the underlying stock, and don't care which way it eventually goes. You purchase a CALL and a PUT on a stock at the same strike price for the same expiration date to open the Straddle.  Figure 1: Straddle on XYZ Example:
©2001 xguru, Inc. A Cardinal Factor Company. All rights reserved. |
