Short At-the-Money Straddle
A short straddle is a combination of a short put and a short call with the same strike price and expiration date. Short straddles are also called short volatility trades because the position profits if the market is stable.
Profits are limited to the premium received. Risk is unlimited in either direction because if futures prices move, one option will be in-the-money and is likely to be exercised. This position takes advantage of premium income and steady markets. Short straddles must be monitored closely because of the strong potential for market movement in high volatility markets.
Position Premium Dollar Premium Delta Sell one $20 crude oill call $1.17 $1,170 -.52 Sell one $20 crude oil put - Net credit - Net delta $1.17 $2.34 $1,170 $2,2340 +.48 -.04 Maximum risk Unlimited in either direction $2,340 per position Maximum profit $2.34 per barrel Break-even futures price $17.66 and $22.34 Position Premium Dollar Premium Delta Sell one $260 gold call $6.70 $670 -.50 Sell one $260 gold put - Net credit - Net delta $6.70 $13.40 $670 $1,340 +.50 0 Maximum risk Unlimited in either direction $1,340 per position Maximum profit $13.40 per ounce Break-even futures price $246.60 and $273.40
THERE IS A RISK OF LOSS IN FUTURES TRADING AND IS NOT SUITABLE FOR
ALL INVESTORS. ONLY RISK CAPITAL SHOULD BE USED WHEN TRADING FUTURES.
Copyright 2008 Capitol Commodity Services, Inc. All Rights Reserved.
Education
- Futures Education
- Options Information
- Options Strategies
- Long At-the-Money Call
- Short Out-of-the-Money Call
- Covered Call
- Ratio Write
- Long Out-of-the-Money Call
- Long At-the-Money Put
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- Long At-the-Money Straddle
- Long Strangle
- Short At-the-Money Straddle
- Short Strangle
- Call Ratio Backspread
- Put Ratio Backspread
- Synthetic Long Put
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- Synthetic Short Futures
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