Introduction to Trading and Investing with Options (Collection)

6. Put Strategies for Straddles: Profits in Either Direction

In the preceding chapter, examples of strategic uses of spreads demonstrated that you can put to work many varieties. You can reduce risks, hedge other positions, and leverage capital in many ways. The same argument applies equally to straddles.

A straddle is opening calls and puts together on the same underlying stock, with the same strike and the same expiration. The positions may be long or short. Although this basic definition applies to all straddles, the positions can be covered or uncovered, extended and altered, and adjusted to either increase or decrease levels of risk.

The Long Straddle

Many straddles come into being not as an initial strategy but as a development of a previously ...