Straddle: Difference between revisions
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imported>Doug Williamson m (Spacing 20/8/13) |
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''Options speculation''. | ''Options speculation''. | ||
A composite speculative deal in two options which results in profits from large changes in the underlying asset price, either up or down. | A composite speculative deal in two options which results in profits from large changes in the underlying asset price, either up or down. | ||
The straddle’s profit/loss profile is ‘V’ shaped. | The straddle’s profit/loss profile is ‘V’ shaped. | ||
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A long straddle is constructed by simultaneously buying a call option and a put option with identical strike prices. | A long straddle is constructed by simultaneously buying a call option and a put option with identical strike prices. | ||
The opposite composite transaction - which is a mirror image of the ‘V’ shaped long straddle - is known as a ''top straddle'' or a ''short straddle''. This is the position taken by the seller of a conventional long straddle. | The opposite composite transaction - which is a mirror image of the ‘V’ shaped long straddle - is known as a ''top straddle'' or a ''short straddle''. | ||
This is the position taken by the seller of a conventional long straddle. | |||
== See also == | == See also == | ||
* [[Option]] | * [[Option]] | ||
* [[Speculation]] | * [[Speculation]] | ||
Revision as of 08:37, 20 August 2013
Options speculation.
A composite speculative deal in two options which results in profits from large changes in the underlying asset price, either up or down.
The straddle’s profit/loss profile is ‘V’ shaped.
It is also sometimes known as a bottom straddle or a long straddle.
A long straddle is constructed by simultaneously buying a call option and a put option with identical strike prices.
The opposite composite transaction - which is a mirror image of the ‘V’ shaped long straddle - is known as a top straddle or a short straddle.
This is the position taken by the seller of a conventional long straddle.
