Long Straddle

Long straddle is an options strategy where an investor buys a call and a put option with the same strike price and expiration date.

An investor uses a straddle when he believes a stock’s price will move in one direction significantly, but is unsure of which direction. If the stock stays still or budges a little, the investor incurs a loss.  Also, uncertainty before a big event is usually priced into options, giving them a higher premium, so even if a big expected move occurs, the total payoff for the investor may not be as high as expected.

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