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Straddle Option

A straddle option s is the best of both worlds, since the call gives you the ability to buy the stock at strike price A and the put gives you the right to sell the stock at strike price A. But those moves dont come at a low price. The mission is to profit if the stock moves in upward or downward direction. Normally, a straddle will be constructed with the call and put at-the-money. Buying both a call and a put increases the cost of your position, especially for a volatile stock. So you’ll need a respected price swing just to get back what you paid for it. Experienced traders run this strategy to take advantage of a possible increase in implied volatility. If implied volatility is abnormally low for no specific reason, the call and put may be valued at low price. The concept is to buy them at a discount, then wait for implied volatility to rise and close the position at a profit.

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