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What are long & short straddle, long & short strap, long & short strip? Differences between and...

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Finance

What are long & short straddle, long & short strap, long& short strip?

Differences between and diagram for each.

Answer & Explanation Solved by verified expert
4.2 Ratings (559 Votes)
LONG STRADDLEA long straddle is an options strategy comprised of purchasingboth a long call and a long put on the same underlying asset withthe same expiration date and strike priceSHORT STRADDLEA short straddle is an options strategy comprised of sellingboth a call option and a put option with the same strike price andexpiration dateLONG STRADDLESHORT STRADDLEIn this strategy the trader believes that the price ofunderlying asset will change sharply but the direction it willchange is unknownIn this strategy the trader believes that the price ofunderlying asset will neither move upwards nor downwardsThe strike price is atthemoney or as close to it as possibleThe options are held for a longer periodThe options are held for a shorter periodThe long straddle is useful when an investor wants to profitfrom either a bullish or bearish move in the underlyingsecurityThe short straddle is useful when an investor holds strong viewsabout the steadiness of the market    See Answer
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What are long & short straddle, long & short strap, long& short strip?Differences between and diagram for each.

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