Definition, Creation, and Profit Potential
What Is a Straddle?
A straddle options strategy lets investors hold both a call and a put with identical strike prices and expiration dates. This neutral strategy aims to profit from significant price changes in the underlying asset, whether it rises or falls. Learn how straddles can indicate expected market volatility and trading ranges.
A trader profits from a long straddle when the security’s price moves beyond the strike price by more than the premium cost. The call option has unlimited profit potential if the underlying security’s price rises sharply. The profit on the put leg is capped at the difference between the strike price and zero less the premium paid.
Key Takeaways
- A straddle options strategy involves…
