Economics Options And Futures Questions
The concept of a straddle in options trading refers to a strategy where an investor simultaneously purchases both a call option and a put option with the same strike price and expiration date. This strategy is used when the investor expects a significant price movement in the underlying asset but is uncertain about the direction of the movement. By having both a call and put option, the investor can profit from either an increase or decrease in the asset's price. The potential profit is maximized if the price moves significantly in either direction, while the risk is limited to the cost of purchasing the options.