Explain the Payoff Structure of a ‘Straddle’ Option Strategy.
A Straddle involves simultaneously buying (Long Straddle) or selling (Short Straddle) a Call and a Put option with the same strike price and expiration date. The Long Straddle profits if the underlying asset moves significantly in either direction (high volatility).
The Short Straddle profits if the price remains stable (low volatility).
Glossar
Long Straddle
Structure ⎊ This strategy involves the simultaneous purchase of an at-the-money call and an at-the-money put option on the same underlying crypto derivative.
Payoff Structure
Structure ⎊ The payoff structure defines the potential profit or loss profile of a financial instrument at expiration, based on the price of the underlying asset.
Short Straddle
Strategy ⎊ A short straddle, within cryptocurrency derivatives, represents a neutral options strategy predicated on anticipating minimal price movement in the underlying asset.
Straddle
Strategy ⎊ A straddle is an options trading strategy involving the simultaneous purchase or sale of both a call option and a put option on the same underlying asset.