Straddle (redirected from straddling)

Straddle

Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: Spread.

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straddle

1. In futures, the purchase of a contract for delivery in one month and sale of a contract for delivery in a different month on the same commodity.

2. In options, the purchase or sale of both a call and a put, generally with the same strike price and expiration date. The buyer of a straddle benefits from large price fluctuations in the underlying asset, while the seller of a straddle, who collects the premiums, benefits from small price changes in the underlying asset.

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Straddle

The strategy in which one has the same position in both a put option and a call option with the same underlying asset, strike price, and expiration date. An investor may have a straddle when he/she believes that the market for the underlying asset will be volatile and will undergo dramatic price changes, but is unsure of which direction the changes will go. A straddle allows the investor to profit regardless of which direction the underlying moves, provided there is a significant movement. A small price change in either direction will result in a loss. See also: Long Straddle, Short Straddle.

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Straddle. A straddle is hedging strategy that involves buying or selling a put and a call option on the same underlying instrument at the same strike price and with the same expiration date.

If you buy a straddle, you expect the price of the underlying to move significantly, but you're not sure whether it will go up or down. If you sell a straddle, you hope that the underlying price remains stable at the strike price.

Your risk in buying a straddle is limited to the premium you pay. As a seller, your risk is much higher because, if the price of the underlying security moves significantly, you may be assigned at exercise to purchase or sell the underlying security at a potential loss.

Similarly, if you choose to buy off-setting contracts when the prices move, it may cost you more than the premium you collected.

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Straddle

What Does Straddle Mean?

An options strategy in which an investor holds a position in both a call option and a put option with the same strike prices and expiration dates.

Investopedia explains Straddle

Straddles are a good strategy for investors who think a stock's price will move significantly but are unsure about the direction. The stock price must move significantly one way or the other for the investor to make money. As shown in the accompanying diagram, if the stock price does not fluctuate, the investor will experience a loss. As a result, a straddle is extremely risky. In addition, when stocks are expected to jump, the market tends to price options at a higher premium, which reduces the expected payoff if the stock moves significantly.

Related Terms:
• Hedge
• Option
• Risk
• Stock Option
• Volatility

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Straddle

A straddle is any set of offsetting positions on personal property. One example, is a put and call option on the same number of shares of a particular security, with the same exercise price and expiration date.