Long Straddle Strategy
Long Straddle Strategy Long straddle is perhaps the simplest market neutral strategy to implement. Once implemented, the P&L is not affected by the direction in which the market moves. The market can move in any direction, but it has to move. As long as the market moves (irrespective of its direction), a positive P&L is generated. To implement a long straddle all one has to do is – Buy a Call option Buy a Put option Ensure – Both the options belong to the same underlying Both the options belong to the same expiry Belong to the same strike Example: Payoff Graph Max Loss : 11028 Max Profit : Unlimited Payoff Table Every 100 points Nifty Profits & loss Will be as in payoff table Key Points : Break-even 21179 to 21621 if Nifty Expiry between Break-even levels you will end up making loss of hole capital which is deployed in this trade. Note: Strategies which are insulated to market direction are called ‘Market Neutral’ or ‘Delta neutral’ Market neutral strategies such as lo
