What Is the Risk-Reducing Effect of a “Straddle” in Options Margin Calculation?
A straddle (buying or selling a call and a put with the same strike and expiration) is considered a hedged position in a portfolio margin context. The margin requirement is lower than the sum of the individual legs because the risks partially offset: the call benefits from a price rise, and the put benefits from a price fall.
The primary remaining risk is volatility risk (Vega).
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.
Short Straddle
Strategy ⎊ A short straddle, within cryptocurrency derivatives, represents a neutral options strategy predicated on anticipating minimal price movement in the underlying asset.