Short straddle

Short straddle,

Definition of Short straddle:

  1. Short straddles allow traders to profit from the lack of movement in the underlying asset, rather than having to place directional bets hoping for a big move either higher or lower. Premiums are collected when the trade is opened with the goal to let both the put and call expire worthless. However, chances that the underlying asset closes exactly at the strike price at the expiration is low, and that leaves the short straddle owner at risk for assignment. However, as long as the difference between asset price and strike price is less than the premiums collected, the trader will still make a profit.

  2. A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date. It is used when the trader believes the underlying asset will not move significantly higher or lower over the lives of the options contracts. The maximum profit is the amount of premium collected by writing the options. The potential loss can be unlimited, so it is typically a strategy for more advanced traders.

  3. Options trading strategy in which a short position is taken simultaneously in a call option and short option on the same underlying asset. Opposite of long straddle. Also called bear straddle.

How to use Short straddle in a sentence?

  1. They are generally used by advanced traders to bide time.
  2. Short straddles are when traders sell a call option and a put option to profit from an underlying lack of volatility in the asset's price.

Meaning of Short straddle & Short straddle Definition