STRATEGY 8 : LONG STRADDLE ( When to Use: The investor thinks that the underlying stock / index will experience significant volatility in the near term. ) A Straddle is a volatility strategy and is used when the stock price / index is expected to show large movements. This strategy involves buying a call as well as put on the same stock / index for the same maturity and strike price, to take advantage of a movement in either direction, a soaring or plummeting value of the stock / index. NIFTY CLOSE 5479.20 Example :- Strategy : Buy Put + Buy Call Suppose Nifty is 5479.20 LEVEL. Aninvestor, Mr. AMEETH enters a long straddle by buying a SEP . Rs 5500 Nifty Put for Rs. 165 and a SEP Rs. 5500 Nifty Call for Rs. 125. The net debit taken to enter the trade is Rs 290, which is also his maximum possible loss. Reward & B EP : Unlimited profit above nifty 5790 and below nifty 5210 . Risk: Limited to the initial premium paid
Posted on: Sun, 01 Sep 2013 05:43:13 +0000
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