Definition of Long straddle:
Options strategy in which a long position is taken in a put option as well as in a call option. Opposite of short straddle. Also called bull straddle.
A long straddle is an options strategy where the trader purchases both a long call and a long put on the same underlying asset with the same expiration date and strike price. The strike price is at-the-money or as close to it as possible. Since calls benefit from an upward move, and puts benefit from a downward move in the underlying security, both of these components cancel out small moves in either direction, Therefore the goal of a straddle is to profit from a very strong move, usually triggered by a newsworthy event, in either direction by the underlying asset.
The long straddle option strategy is a bet that the underlying asset will move significantly in price, either higher or lower. The profit profile is the same no matter which way the asset moves. Typically, the trader thinks the underlying asset will move from a low volatility state to a high volatility state based on the imminent release of new information.
How to use Long straddle in a sentence?
- A long straddle is an option strategy attempting to profit from big, unpredictable moves.
- Sophisticated calculations by option sellers make this strategy challenging.
- The strategy includes buying both a call and put option.
- An alternative use for the strategy may be to profit from the rising demand for these options.
Meaning of Long straddle & Long straddle Definition