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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

straddle  

Definition 1.

The purchase or sale of an equal number of puts and calls, with the same strike price and expiration dates. A straddle provides the opportunity to profit from a prediction about the future volatility of the market. Long straddles are used to profit from high volatility. Long straddles can be effective when an investor is confident that a stock price will change dramatically, but cannot predict the direction of the move. Short straddles represent the opposite prediction, that a stock price will not change.
 

Definition 2.

The purchase or sale of an equal number of puts and calls on an underlying stock, with the same strike price and expiration date. The investor who purchases or sells a straddle seeks to profit from moderate changes in the price of the underlying stock, regardless of whether the prices goes up or down.
 

Definition 3.

Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: Spread.
 

Definition 4.

An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.
 
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