Long Straddle

What is a 'Long Straddle'

A long straddle is a strategy of trading options whereby the trader will purchase a long call and a long put with the same underlying asset, expiration date and strike price. The strike price will usually be at the money or near the current market price of the underlying security.

BREAKING DOWN 'Long Straddle'

The strategy is a bet on increased volatility in the future as profits from this strategy are maximized if the underlying security moves up or down from present levels. Should the underylying security's price fail to move or move only a small amount, the options will be worthless at expiration.

RELATED TERMS
  1. Iron Butterfly

    An options strategy that is created with four options at three ...
  2. Straddle

    An options strategy in which the investor holds a position in ...
  3. Covered Straddle

    An option strategy that involves writing the same number of puts ...
  4. Short Straddle

    An options strategy carried out by holding a short position in ...
  5. Bull Put Spread

    A type of options strategy that is used when the investor expects ...
  6. Near The Money

    An options contract where the strike price is close to the current ...
Related Articles
  1. Trading

    Profit On Any Price Change With Long Straddles

    In this strategy, traders cash in when the underlying security rises - and when it falls.
  2. Investing

    Income Strategies for Your Portfolio to Make Money Regularly

    Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums.
  3. Trading

    What's the Strike Price?

    The strike price is the price at which a derivative can be exercised, and refers to the price of the derivative’s underlying asset. In a call option, the strike price is the price at which the ...
  4. Trading

    Profiting From Stock Declines: Bear Put Spread Vs. Long Put

    If you're bearish, you should compare the risk/reward characteristics of these two strategies.
  5. Trading

    Profit From Earnings Surprises With Straddles And Strangles

    These option strategies allow traders to play on earnings announcements without taking a side.
  6. Trading

    Options Pricing: A Review Of Basic Terms

    The following is intended as a review of basic option terminology, which can be used as a reference as needed: American Options - An option that can be at any point during the life of the contract. ...
  7. Investing

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  8. Managing Wealth

    Strategies for Trading Volatility With Options (NFLX)

    These five strategies are used by traders to capitalize on stocks or securities that exhibit high volatility.
  9. Trading

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  10. Trading

    Tips For Series 7 Options Questions

    We'll show you how to ace the largest and most difficult section of this exam.
RELATED FAQS
  1. What options strategies are best suited for investing in the financial services sector?

    Learn the options strategies top traders use to take advantage of the volatility in the financial services sector and the ... Read Answer >>
  2. What options strategies are best suited for investing in the aerospace sector?

    Learn how investors profit from volatility in the aerospace sector by employing options strategies, which include the long ... Read Answer >>
  3. What options strategies are best suited for investing in the retail sector?

    Learn how savvy investors employ options strategies such as the long straddle and long strangle to profit from the volatile ... Read Answer >>
  4. How does the term 'in the money' describe the moneyness of an option?

    Find out what in the money means about the moneyness of call or put options and what it indicates about the relationship ... Read Answer >>
  5. What options strategies are best suited for investing in the telecommunications sector?

    Learn why the long straddle option strategy is the best method in an investor's arsenal to capitalize on the volatile nature ... Read Answer >>
  6. When is an options straddle deep in the money?

    Learn about options straddle positions, the moneyness of straddles and when a straddle position is considered to be deep ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center