Overview

straddle


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A strategy used by dealers in options or futures contracts. In the option market it involves simultaneously purchasing put and call options; it is most profitable when the price of the underlying security is very volatile. Compare butterfly. In commodity and currency futures a straddle may involve buying and selling options or both buying and selling the same commodity or currency for delivery in the future, often on different markets. Undoing half the straddle is known as breaking a leg.

Subjects: Economics.


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