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straddle option

March 27, 2016

Straddle option strategy is a non-directional strategy. This means that you can make money without knowing where industry will move. It doesn't matter if it moves up or down, you can make money if it moves either way. options market

The position is developed by purchasing exactly the same quantity of call and put options with exactly the same strike price and expires at exactly the same time. There are two types of Straddle, long straddle and short straddle. Long Straddle is developed by purchasing an at the amount of money call option and a put option. The two choices are bought at exactly the same strike price and expire at exactly the same time. A short Straddle is developed by selling a put and a phone of exactly the same stock, strike price and expiration date.

Long Straddle has unlimited profit and limited loss. While on Short Straddle the profit is limited by the premiums of the options. Short Straddle loss is unlimited if stock price comes up quite high or planning to zero.

Straddles is usually utilized in uncertainty like before an important corporate announcement, earning announcement, or drug approval. When the news headlines eventually arrives, the purchase price should go up or down radically. Because of its characteristic, it is known as a volatile option strategy. Another tip on buying Long Straddle is to buy it if it is in low volatility. The price is cheaper than when it's high volatility. When price is consolidating by having an expectation so it will use, it is the greatest time for you to Long Straddle.

Knowing technical analysis, you can enter the long straddle position when it shows'triangle'or'wedge'formations. You can notice that the recent highs and lows are coming together. It's a signs of breakouts. option straddle

The straddle trade is a long time strategy. It could take anywhere from a few days up to and including month, so that you do not need to watch it every few hours.

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