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.

Use straddle in a sentence

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
short straddle covered straddle