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The long straddle is a non-directional options trading strategy that involves the simultaneous buying of a put and a call of the same underlying stock, striking price and expiration date. It is a unlimited profit, limited risk strategy that is taken when the options trader thinks that the underlying stock will experience significant volatility in the near term. The long straddle is a debit spread as a net debit is taken to enter the trade.
[edit] References
- McMillan, Lawrence G. (2002). Options as a Strategic Investment, 4th ed., New York : New York Institute of Finance. ISBN 0-7352-0197-8.
