straddle (redirected from straddled)

Straddle

An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.

Notes:

Straddles are a good strategy to pursue if an investor believes that a stock's price will move significantly, but is unsure as to which direction. The stock price must move significantly if the investor is to make a profit. As shown in the diagram above, should only a small movement in price occur in either direction, the investor will experience a loss. As a result, a straddle is extremely risky to perform. Additionally, on stocks expected to jump, the market tends to price options at a higher premium, which ultimately reduces the expected payoff should the stock move significantly.

See also: Options, Strangle, Strap, Strip

---

Straddle

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

---

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.