straddle
Definition
The purchase or sale of an equal number of puts and calls, with the same strike price and expiration dates. A straddle provides the opportunity to profit from a prediction about the future volatility of the market. Long straddles are used to profit from high volatility. Long straddles can be effective when an investor is confident that a stock price will change dramatically, but cannot predict the direction of the move. Short straddles represent the opposite prediction, that a stock price will not change.
Cite this definition
Related Terms
combination, long straddle, short straddle, strap, covered straddle
Related Research Articles from the InvestorGuide.com University
Principles of Investing Here are the seven fundamental principles of investing that every investor should know. Topics include knowing your current situation, goals and risk tolerance; getting your finances in order; thinking long term and focusing on stocks; researching and monitoring your investments; and knowing when and how to get financial help.

Introduction to Other Investments Stocks, bonds and mutual funds are the most popular asset classes and therefore get most of the market's attention, but there are other important investment opportunities every investor should know about as well, including options, futures, and currency. Although these investments are complex and usually intended for sophisticated investors, it's worth understanding what they are and how they operate in order to decide if they should play any role in your overall investment strategy.

Options Learn about call and put options, the components of an options contract, how to value and price options, and what the advantages and disadvantages of options to help you decide if they are the right investment for you.

Featured Sponsor
|
|