What is Straddle & strangle strategy ?

Question

Accepted Answer

Straddle & strangle are options trading strategies involving buying or selling both a call and a put with the same strike price and expiration date.

Straddle involves buying both a call and put option with the same strike price and expiration date, anticipating a significant price movement in either direction.
Strangle involves buying or selling a call and put option with different strike prices but the same expiration date, anticipating a significant price movement in either direction.
Both strategies are used when the trader expects high volatility in the underlying asset but is unsure about the direction of the price movement.
Example: A trader buys a straddle on a stock trading at $100 by purchasing a $100 call option and a $100 put option. If the stock moves significantly in either direction, the trader profits.
Example: A trader sells a strangle on a stock trading at $50 by selling a $45 put option and a $55 call option. If the stock remains within the $45-$55 range, the trader profits.

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