What Is a Straddle Options Strategy? Types & Examples

A straddle involves buying or selling a call option and a put option with the same strike price and expiry on the same underlying asset. Generally, a straddle is of two types:

Long Straddle

Short Straddle

A long straddle involves buying both options.It may potentially benefit from a large price movement in either direction.Example:Suppose NIFTY is at ₹25,000.A trader buys a ₹25,000 Call for ₹150 and a ₹25,000 Put for ₹140, paying a total premium of ₹290. If NIFTY makes a large move above or below ₹25,000, one option can gain enough value to offset the combined premium and potentially generate a profit.

A short straddle Nifty involves selling both options.It may potentially benefit when the underlying remains near the strike price. However, a short straddle carries substantial risk if the underlying asset moves sharply.Example:Suppose NIFTY is at ₹25,000.A trader sells a ₹25,000 Call for ₹150 and a ₹25,000 Put for ₹140, receiving ₹290 in total premium. If NIFTY remains close to ₹25,000 at expiry, both options may expire with little or no intrinsic value.This allows the trader to retain some or all of the premium before charges.

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What is the Straddle Options Strategy?

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