Straddle Option Strategy

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Introduction

“Many traders – many strategies”. And of course every trader will choose the one that would suit him/her most of all. In this short guide through all existing binary options strategies, we would like to make an emphasis on Straddle option strategy.

The Straddle Strategy

The main focus of this options strategy is on purchasing call and put options of a stock. These calls and puts have to be with the same expiration time and strike price.

The question that is asked by many beginning traders is the following – why would I need to buy both Calls and Puts? – Let’s not forget that the stock market movement is very unpredictable and can either go up – Call, or down – Put. Yet the Straddle strategy is the one that lets a trader determine underlying’s price movement rather than its direction. In any of 2 possible outcomes, a trader will either win if the prediction turned out to be right or lose if the prediction didn’t come true.

Long Straddle

Long straddle – refers to purchasing option derivatives. Going long is when an investor buys call and put options at the same fixed price, interest rate etc. To win, the price has to move through the strike price. Only in this case an investor will get profit due to trading signals.

When the price starts moving in one of two possible directions, a trader has an opportunity to make a call or put option. This strategy always works when the market is unpredictable and the price changes very fast.

Using long straddle strategy is a great chance to increase income at minimum risk.

Short Straddle

Short straddle – is opposite to long and means the selling process of options derivatives, yet it also includes selling call and put options. Unlike long straddle, short one has limited potential profits and some risk concerning the direction of the underlying.

Resume

Both Long and Short Straddle is a great binary option for those traders who have a desire to unlimited / limited profit that includes some risk. The most important is to take into account all possible factors that might influence on the movement of the stock and after that make the right prediction.

Apart from that also consider the level of risk you are ready to take as well as the profit you wish to receive. The money is yours and only you can decide. Nevertheless, always check, compare and analyze the stock market in order to win.