Options Strategy - Long Straddle

Introduction

This strategy will be good when an investor believes that the price of the underlying asset will move significantly out of the specific range. However, the direction of the movement is unclear.

Maximum Gain

• Unlimited upside if the stock goes up.
• Substantial but limited to the "strike price" - "the total premium paid" if the stock goes down.

Maximum Loss

Maxmium loss is capped at the cost of both options combined.

Composition

• Purchases a call and a put option on the same underlying asset with the same strike price and expiration date

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