Chapter 15: Advanced strategies: straddles and strangles
In this chapter we will look at two other types of multiple option strategies. These are straddles and strangles.
Option straddle strategy
Straddle strategies involve buying or selling options with the same strike price and the same expiry date. When buying put and call options simultaneously, you are opening a long straddle.
The long straddle strategy is designed to create a profit if the market value of the underlying stock moves significantly. It is often used when a stock has been trading in a stable trading range and you are speculating that the price will break out in the near term. It is also appropriate for volatile stocks, although the cost to open the position will be higher ...
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