Short Straddle Option Strategy - Long Straddle and Short Straddle

Dec. 27, 2010 - PRLog -- Short Straddle Option Strategy

Straddles is a good strategy when you believe a stock will move significantly, but are unsure about the direction. With this strategy you will loss if the price does not move a lot. Additionally when many people expect the stock to jump, the option will have higher premium which will reduce your profit. So this is actually quite a risky strategy.

Straddles if often used in uncertainty which will move the price significantly. Those situations are when before an important corporate announcement, court verdict, earning announcement, or drug approval. Because it is so volatile straddle is called a volatile option strategy.

To create a long straddle or straddle you will need to purchase an at the money call option and a put option. The two options are bought at the same strike price and expire at the same time. The call option will provide you with unlimited profit when stock rise and limited loss to down side. The put option will give you unlimited profit to downside and limited loss to upside. By combining them you can profit when the market go up or down. You can also profit if volatility rises without significant price change. Option price will rise if it is in high volatility condition. So when you buy it in low volatility condition, the price is cheaper than when it has high volatility condition. Get Internet #1 - Short Straddle Option Strategy @ http://tradingcure01.webs.com and be Successful forever!

Overall straddle will give unlimited profit and limited loss. Besides that advantage, it has also other advantage like you do not have to spend time to analyze if a stock will go up or down ahead of major news releases.

On the other hand, a short straddle is an options trading strategy that simultaneously selling a put and a call of the same stock, strike price and expiration date. The profit is limited to the premiums of the options, but the loss is unlimited if the underlying security's price goes very high up or very low down. Get Internet #1 - Short Straddle Option Strategy @ http://tradingcure01.webs.com and be Successful forever!

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