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March 27 2016


straddle option

When industry is stable, options could be a big winner for certain option trading strategies. One is really a short straddle. A quick position like this really is made up of a brief call and a brief put option. straddles can earn the investor premium income right away. To fully understand the dynamics of a straddle, it is better to comprehend the basic risks and rewards with selling options short.stock options trading

Short Call

An investor who sells short a call option is looking to really make the premium income on the sale. The options trader is hoping industry declines or stays the same - thus keeping the premium earned without any obligation to the decision holder. If industry rises, and the stock itself is not owned by the options investor - the individual could sustain an unlimited loss. Each time a call option is exercised, the seller must deliver the stock at the strike price. If he does not own it, he's to get it in the market - which will most likely be higher than the price he has to sell. A quick call is part of a brief straddle.

Short Put

Selling puts short also generates premium income, but this trader would want the stock to rise - allowing the put to expire. The utmost gain with this investor could be the premium. If industry declines, the put may get exercised. The obligation of a brief put investor is to buy the stock at the strike price. The trader will miss if this happens. Selling puts is the other part of a brief straddle.options market

Short Straddle Strategy

The foundation behind the strategy is to make the most of what short calls and short puts can accomplish together. The straddle will earn the investor more in premium then if the options were sold independently as single contracts. Combining these could provide investor more profit - but carry more risk. If someone is knowledgeable about a specific stock and it's normal trading behavior - they could be great candidates for short straddle investing. If you're playing an investment that shows limited movement or at the very least limited trading movement during a particular time - a brief straddle can perhaps work well. Whatever you are searching for is for both options to expire. The premiums received is the maximum gain.

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