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Options Strategy - Long Straddle.

A straddle is an trading strategy involving the purchase or sale of particular option (put,call) that allows the holder to profit based on the extent of movement of underlying stock price, regardless of the direction of price movement. The purchase of particular option derivatives is known as a long straddle, while the sale of the option derivatives is known as a short straddle.

simplifying , The long straddle , also known as buy straddle is a strategy in options trading that involves the simultaneous buying of a put and a call of the same stock ,same strike price and the same expiration date. Having long position in both call and put , the straddle can provide infinite gain opportunity even if the stock moves in either direction. For example, if the stocks begin to fall then the maximum loss one would have to bear is the price of the call already paid..while if the extent of the fall is enormous then the put bought would keep on increasing as it gets turned into in the money option or simply goes in the money.Same goes for the bullish market.while if the market remains rangebound and hovers around the strike price, both the options begin to loose premium as expiry sets in.

The max loss count be define as the premium paid for both the options + brokerage paid. The main issue in options trading remains to be of the time value decay and should be kept in mind while getting into the strategy.


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