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Trading Commodities and Financial Futures: A Step-by-Step Guide to Mastering the Markets, Third Edition by George Kleinman

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Straddles and strangles

Straddles and strangles are option spreads that involve both puts and calls. The straddle involves buying or selling puts and calls at the same strike price. During the life of a straddle, it is almost a certainty that one or both of the options will be in the money at any point in time. The strangle involves different strike prices, so it is less likely that both, or even one of the strangle legs, will be in the money at any point in time. However, it is certainly quite possible. There are two sides to each of these market plays, so let's examine the four possibilities.

Buying a straddle

It is late September, and the December ...

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