Long Straddle
-
Sep-13-2024
Long Straddle
Market View
A big move up or down
The Trade
Buy a put and call at the same strike near the stock price. Your view is that the stock will either go down or up in a big way.
Premium
Pay
Margin
Required
When To Do
- When the stock is going to move big in one direction
- Avoid buying high IV
Pros
- Big Upside is there is a breakout
Cons
- Low probability of success
- High loss if the stock stays rangebound
- High Vega and Theta Risk
Time and Volatility
- Loses time value decay every day