Straddles & Strangles

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Stock option strangles and straddles are borderline from basic to advanced strategies. These strategies are especially good, during times, where direction of the underlying asset is questionable, such as earnings reports or news.

Stock Option Strangle

A strangle benefits the buyer regardless of which direction the stock moves. In order to profit from a strangle the underlying asset nees to move in either direction, but whcih does not matter due to the purchase of a call and a put.

For example, in stock ABD the stock is at 50, they spread trader would buy the 45 call and 55 put. Now this allows for unlimited profit potential on both sides.

Spreads are not basic strategies, and they are usually used when market direciton is quesionble.

These are good for trading around news.

For more infomation see the Resources page. Check out www.freeoptionspick.com for FREE picks like these.

Stock Option Straddle

A straddle is very similar to a strangle, the only difference will be the purchase of the strikes.

For example, in the stock ABD if the stock price is currently $50, you the spread trader, would buy the $50 call and the $50 long put

Same as the strangle, all you need a is a large enough move to offset the cost of commissions and cover the loss on the opposite position.

See Resources.