Straddle

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

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straddle strad‧dle [ˈstrædl] noun [countable] FINANCE
1. a combination of call option S (= rights to buy particular shares at a fixed price within a certain period of time) and put option S (= rights to sell particular shares at a fixed price within a certain period of time) relating to the same shares and with the same exercise price. The holder of a straddle makes a profit if the share price goes up or down by a large amount during the life of the options:

• One investor bought 400 lots of the November 425p puts and calls at 50p each to set up a straddle which would be profitable if the underlying shares move out of a small trading range.

2. a situation where someone buys financials or Commodities Futures with different delivery dates:

• Straddle investments, where an investor reduces risk by buying a contract of one month and selling the contract of another, are popular with producers and consumers of commodities.

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   An option strategy involving one call and one put with the same strike and same expiry date. The strategy allows the buyer to take advantage of large price movements in either direction, by exercising the call in a rising market and the put in a falling market. The risk is that prices move only slightly and the change is not enough to cover the costs of the two options.

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straddle UK US /ˈstrædl/ noun [C] (also strangle) FINANCE, STOCK MARKET
a situation in which an investor buys or sells both a call option (= agreement to buy shares at a fixed price before or on a fixed date) and a put option (= agreement to sell shares at an agreed price before or on a particular date): »

There is a lower level of initial margin on straddle positions because the daily price movements are likely to be lower than in the individual contracts.

long straddle — Cf. long straddle
short straddle — Cf. short straddle

Financial and business terms. 2012.

Synonyms:

Look at other dictionaries:

  • straddle — strad·dle / strad əl/ n: the purchase of an equal number of put options and call options on the same underlying securities with the same price and maturity date Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. straddle …   Law dictionary

  • straddle — [strad′ l] vt. straddled, straddling [freq. of STRIDE] 1. to place oneself with a leg on either side of; stand or sit astride of 2. to spread (the legs) wide apart ☆ 3. to take or appear to take both sides of (an issue); avoid committing oneself… …   English World dictionary

  • Straddle — Strad dle, v. t. To place one leg on one side and the other on the other side of; to stand or sit astride of; as, to straddle a fence or a horse. [1913 Webster] …   The Collaborative International Dictionary of English

  • Straddle — Strad dle, n. 1. The act of standing, sitting, or walking, with the feet far apart. [1913 Webster] 2. The position, or the distance between the feet, of one who straddles; as, a wide straddle. [1913 Webster] 3. A stock option giving the holder… …   The Collaborative International Dictionary of English

  • Straddle — A straddle means a transaction for a future delivery of cotton either for the purchase of a certain number of bales of one growth for a specific period of delivery, and for the sale of an equivalent number of bales of similar growth for another… …   Dictionary of the English textile terms

  • Straddle — Strad dle, v. i. [imp. & p. p. {Straddled}; p. pr. & vb. n. {Straddling}.] [Freq. from the root of stride.] 1. To part the legs wide; to stand or to walk with the legs far apart. [1913 Webster] 2. To stand with the ends staggered; said of the… …   The Collaborative International Dictionary of English

  • straddle — (v.) 1560s, probably an alteration of stridlen, frequentative of striden (see STRIDE (Cf. stride)). U.S. colloquial sense of take up an equivocal position, appear to favor both sides is attested from 1838. Related: Straddled; straddling. The noun …   Etymology dictionary

  • straddle — (izg. strèdl) m DEFINICIJA sport žarg. tehnika skakanja uvis pri kojoj skakač, okrenut trbuhom letvici, prelazi letvicu prvo glavom (prvi put primijenjena 1957) ETIMOLOGIJA engl …   Hrvatski jezični portal

  • straddle — ► VERB 1) sit or stand with one leg on either side of. 2) extend across both sides of. ► NOUN ▪ an act of straddling. ORIGIN from dialect striddling «astride» …   English terms dictionary

  • Straddle — In finance, a straddle is an investment strategy involving the purchase or sale of particular option derivatives that allows the holder to profit based on how much the price of the underlying security moves, regardless of the direction of price… …   Wikipedia

  • straddle — For futures, the same as spreading. In futures options, a straddle is formed by going long a call and a put of the same strike price ( long straddle), or going short a call and a put of the same strike price ( short straddle) . The CENTER ONLINE… …   Financial and business terms

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