How Does a Trader Determine the ‘Break-Even Points’ for a Long Straddle?
A Long Straddle involves buying both a Call and a Put with the same strike price and expiration date. The break-even points are calculated by taking the common strike price and adding the total premium paid for the Call and the Put for the upper break-even point.
For the lower break-even point, the total premium paid is subtracted from the strike price. The asset's price must move beyond these two points at expiration for the trade to be profitable.
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.
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.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.