Learn to trade options: Creating a long straddle strategy



A long straddle is a debit option strategy in which a trader buys a put and call option of the same symbol simultaneously. Both options must also have identical expiration dates and strike prices. A long straddle is typically used by a trader who thinks the security will experience considerable short-term volatility, meaning the trader can still potentially profit whether the underlying stock price appreciates or depreciates in value. Profit potential is unlimited if the underlying stock price moves in one direction (unlimited on the upside; substantial on the downside), while maximum loss is limited to the option premium paid. Loss can occur in several ways, depending on the various outcomes at expiration. A trader will lose money if the underlying stock price remains neutral or if the stock price moves above or below the strike price, but remains below the upper or above the lower break. In this video, we'll explain how to construct a long straddle strategy in Questrade IQ, and how to calculate your potential profit and loss using a detailed example. Sign up for a free practice account http://www.questrade.com/platforms/free_trial.aspx Open an account http://www.questrade.com/account/online.aspx Questrade Advantage Sign-up for the Questrade Advantage to trade single- and multi-leg options for only $6.95 + 75 cents per contract. Learn more about long straddles http://help.questrade.com/how-to/iq-edge/stock-and-option-quotes/options/option-strategies/long-straddle

Comments

  1. What about the commission fees ($6.95 per option contract + 0.75 per share) ?


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Duration: 4m 22s

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