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#Straddle Explained
This #strategy involves two options of same strikes price & same expiry, A long straddle is created by buying a call and a put of same strike & same expiry whereas a short straddle is created by shorting a call & put option of same strike & same expiry
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This #strategy involves two options of same strikes price & same expiry, A long straddle is created by buying a call and a put of same strike & same expiry whereas a short straddle is created by shorting a call & put option of same strike & same expiry
1/n
Let us say a #stock is trading at Rs 6,000 and premiums for ATM call and put options are 257 and 136 respectively.
Long #Straddle
If you buys both a call & a put at these prices, then his maximum loss will be equal to the sum of these two premiums paid, which is equal to 393
2/n
Long #Straddle
If you buys both a call & a put at these prices, then his maximum loss will be equal to the sum of these two premiums paid, which is equal to 393
2/n
And, price movement from here in either direction would first result in that person recovering his premium and then making profit. This position is undertaken when trader’s view on price of the underlying is uncertain but he thinks that in whatever direction the market moves
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