Long Options Straddle – A Delta Neutral Strategy Overview

• Strategy: Buy ATM put options contract + Buy ATM call options contract (ratio of 1 to 1)

• Number of legs: 2

• Market Prognosis = Both Bullish and Bearish (Non-Directional)

• Implied Volatility = In the low 20% of the last one year. This requires specialist software such as Optionetics Platinum.

• Expiration Month = 60 days or more to expire

• Max Loss = Risk = Limited to premium paid for options straddle = Premium paid for both calls and puts

• Max Profit = Unlimited

• Upside Breakeven Point = strike price + premium paid for both legs

• Downside Breakeven Point = strike price – premium paid for both legs

• Margin = None

• Advantage over Straight Call or Put = Make money regardless stock is up or down

• Advantage over Put or Call Spread = reason above + unlimited profit in either direction.

• Disadvantage over Straight Call or Put and Put or Call Spread = Significant higher cost + exposure to an IV crash