Straddles

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A long straddle involves the simultaneous purchase of a call and a put with the same strike and expiration, and for the same number of underlying units.

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Straddle refers to the shape of the net payout around the strike.

 

Straddles are outright bets on volatility around the common strike of the options.

 

The strategy becomes a mostly directional bet if the strikes are located far away from the current (at the money) underlying market price.