What Is the Maximum Profit Potential for a Long Straddle Using ATM Options?
The maximum profit potential for a long straddle is theoretically unlimited. Since the strategy involves buying both a Call and a Put, a massive move in the underlying asset's price in either direction (up for the Call, down for the Put) will lead to an ever-increasing intrinsic value for one of the legs.
The profit is the intrinsic value minus the total premium paid.
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.
Profit Potential
Attainment ⎊ Profit Potential in derivatives trading is derived from the ability to employ leverage, hedge existing exposures, or speculate directionally on future price movements with a relatively small initial capital commitment.
Maximum Profit Potential
Scope ⎊ Maximum Profit Potential for an option buyer is theoretically unlimited when purchasing a call option, as the underlying cryptocurrency price can theoretically rise indefinitely.
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.