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Question posted: 07 15 2010 10:15:07 +0000,
2 answers, 293 views, last activity
07 20 2010 06:58:52 +0000
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Straddle:
An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.
Straddles are a good strategy to pursue if an investor believes that a stock's price will move significantly, but is unsure as to which direction. The stock price must move significantly if the investor is to make a profit.
Strangle:
An options strategy where the investor holds a position in both a call and put with different strike prices but with the same maturity and underlying asset. This option strategy is profitable only if there are large movements in the price of the underlying asset.
This is a good strategy if you think there will be a large price movement in the near future but are unsure of which way that price movement will be.
Straddle includes a call and a put with the same exercise price, while strangle with different exercise price. Investors who are long / buy straddle or strangle, expect a highly volatile market. That is a considerable increase or decrease in the price of the underlying, will both benefit. If one expect the market to be less volatile, should go short.
The difference between being that, strangle is usually employed when the investor have unequal probabilities regarding the direction.
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