Long Straddle

The long straddle is a distinct strategy that focuses on both ways a stock could move. The long straddle uses a sensible process:

1. Buy a call at a certain strike price and expiration date.
2. Buy a put on the same investment with the same strike price and expiration date included.
3. The general goal is to have the stock move up or down in value.

This is a great strategy to use regardless of whether you want the stock to go significantly higher or lower than the price it is at presently. With this, you are hedging the options by thinking that a stock will move up or down. The opposite option will expire and not be exercised while the positive option will be exercised at the end. The profits you realize from the successful option will surely outweigh whatever you might lose from the other one.

The maximum loss will only be the two premiums that you paid for this option. This is great for your investment plans, but you still have to watch how the stock price is going to move. You need to choose a stock that is not volatile.

The movement has to be checked appropriately to ensure that the stock will actually stay strong with a certain value attached to it. Also, there is a chance for the time decay on this strategy to be high because it does not take long for your odds to have a successful option decline when time advances and the stock does not favor one particular rate.