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Long Straddle

Long Straddle

  • date-icon 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
  • Gains if IV goes up