The breakeven points can be calculated using the following formulae. He can enter into a long straddle, where he gets a profit no matter which way the price of XYZ stock moves, if the price changes enough either way. This would require the stock to move both below the put option's strike price and above the call option's strike price at different times before the option expiration date. A straddle implies what the expected volatility and trading range of a security may be by the expiration date. For instance, a sell Trade options FREE For 60 Days when you Open a New OptionsHouse Account.

because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date....[Read on...], As an alternative to writing covered calls, one can enter a bull call spread for

The straddle option should have the same underlying stock.

In finance, a straddle strategy refers to two transactions that share the same security, with positions that offset one another. take on higher risk. Same strike price. Many a times, stock price gap up or down following the quarterly earnings report and the options trader loses the entire initial debit taken to enter the trade. If the stock price is close to the strike price at expiration of the options, the straddle leads to a loss. A straddle can give a trader two significant clues about what the options market thinks about a stock. If the price goes up enough, he uses the call option and ignores the put option.

stock as a means to acquire it at a discount....[Read on...], Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time.....[Read on...], If you are investing the Peter Lynch style, trying to predict the next multi-bagger, volatility in the near term. You should not risk more than you afford to lose. If the stock fell to $48, the calls would be worth $0, while the puts would be worth $7 at expiration. Through repeated straddling, gains can be postponed indefinitely over many years. A put option grants the right to the owner to sell some amount of the underlying security at a specified price, on or before the option expires. There are two modifications of the straddle strategy, the strap StockCharts.

Short straddles are used when little movement is expected of A short straddle is a non-directional options trading strategy that involves simultaneously selling a put and a call of the same underlying security, strike price and expiration date.

The worst-case scenario is when the stock price stays at or near the strike price. At this price, both options expire worthless