Straddle option strategy is a non-directional strategy. Which means you may make money without knowing where industry will move. It doesn't matter when it moves up or down, you may make money when it moves either way. options trading
The positioning is created by purchasing exactly the same quantity of call and put options with exactly the same strike price and expires at exactly the same time. You can find two forms of Straddle, long straddle and short straddle. Long Straddle is created by purchasing an at the money call option and a put option. The two choices are bought at exactly the same strike price and expire at exactly the same time. A brief Straddle is created by selling a put and a call of exactly the same stock, strike price and expiration date.
Long Straddle has unlimited profit and limited loss. While on Short Straddle the profit is limited by the premiums of the options. Short Straddle loss is unlimited if stock price goes up very high or planning to zero.
Straddles is often used in uncertainty like before a significant corporate announcement, earning announcement, or drug approval. When the news eventually arrives, the purchase price will go up or down radically. Due to the characteristic, it is named a volatile option strategy. Another tip on buying Long Straddle is to get it if it is in low volatility. The cost is cheaper than when it has high volatility. When price is consolidating by having an expectation that it will break out, it is the best time and energy to Long Straddle. trading options
If you know technical analysis, you are able to enter the long straddle position when it shows'triangle'or'wedge'formations. You are able to realize that the recent highs and lows are coming together. It is a signs of breakouts.
The straddle trade is a long time strategy. It could take anywhere from a few days up to and including month, so you never need to watch it every few hours.