Short Straddle Option Strategy
When to use: Short straddle option strategy is used when the investor believes that the stock is not very volatile. The idea is to earn an option premium on two option contracts. The investor believes that the stock price will not change much before the expiry date. The maximum profit is the amount of premium collected by writing the […]
Long Straddle Option Strategy
When to use: Long Straddle Option Strategy is useful for investors who believe that the stock will be very volatile (i.e. move a lot in price) but are uncertain about the direction of the move. For example, suppose you believe an important court case that will make or break a company is about to be settled, and […]
Short Strangle Option Strategy
When to use: Short Strangle Option Strategy is used when the investor believes that the stock is not very volatile and that the stock price will not change much before the expiry date. The intention is to earn an option premium on two options at the same time. How it works: In the short strangle option strategy you sell an out-of-the-money call option […]
Long Strangle Option Strategy
When to use: Long Strangle Option Strategy is used when the investors believe that the stock will experience very high volatility but uncertain about the direction of its movement. How it works: In the long strangle option strategy you buy an out-of-the-money call option and an out-of-the-money put option of the same stock with the same expiration date, T. For example: On 16th August […]