Option trading strategy: Straddle
Trader will enter into Straddle when he expects that a company’s shares will be very volatile and experience sharp price fluctuations following an event such as announcing Quarterly profit. Currently, the stock’s price is Rs. 100. In turn, they create a straddle by purchasing both a Rs.10 put and a Rs.10 call option at a Rs.100 strike which expires on April 30. The trader would realize a profit if the price of the underlying security was above Rs.120, or below Rs. 80 (i.e:- strike price - premium paid)
Courtesy: adigitalblocker
A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date.
SPOT : 11500 (300) 11500 CE (Bullish) (300) 11500 PE (Bearish)
11900- 11500 = (400-300) = 100 PROFIT
11500-11900 = 300 LOSS
NET PROFIT = 300-100 = (-200)
12200- 11500 = (700-300) = 400 PROFIT
11500-12200 = 300 LOSS
NET PROFIT = 400-300 = (+100)
11500- 11500 = (0) = LOSS
11500-11500 = (0) = LOSS
NET PROFIT = (-600)
11000- 11500 = = 300 LOSS
11500-11000 = (400-300) = 100 PROFIT
NET PROFIT = 100-300 = (-200)
10500- 11500 = = 300 LOSS
11500-10500 = (1000-300) = 700 PROFIT
NET PROFIT = 700-300 = (+400)
BE UP : 12100
BE DOWN: 10900
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