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Straddles
As a strategy, the Straddle demonstrates some of the unique
benefits of options for investors – that of flexibility.
Specifically, using a combination of calls and puts
simultaneously, a properly constructed Straddle will provide
the investor with the opportunity for profit, irrespective
of which direction the underlying share price is moving. As
such, it is an extremely powerful tool.
This module introduces how to construct a straddle as well
as the benefits and the risks associated with it. While this
is not a strategy that we use that often, when applied at
the correct time, it has the potential to generate
substantial returns with a measured and manageable amount of
contained risk.
Such special circumstances can include the time around
company results announcements, major news events and other
similar factors that can impact on volatility. Therefore,
setting a Straddle as a trap can be both rewarding and
relatively low risk, for those traders who have the skills
to harness it.
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