The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question – “What is a long straddle?” A long straddle is an aggressive option buying strategy whereby you are purchasing the exact same strike call option and put option. For example, if a stock is trading at say $80, you would buy the 80 strike put option and purchase the 80 strike call option and that’s what creates the straddle payoff diagram. Now, this option strategy like I mentioned, is an aggressive option buying strategy because you are looking for a large move in the underlying stock in either direction. It is a neutral strategy, but you have to get a move in the underlying stock that is more than the combined premium you purchased the option contracts for. For example, if the stock is trading at say $80 and you purchase the 80 strike call and the 80 strike put and the combined purchase of those call options cost you $5, your breakeven points are now $75 and $85. And so, theref