A straddle is an options strategy that involves buying both a put option and a call option with the same strike price and expiration date. The goal of a straddle is to profit from a large price movement in the underlying asset, regardless of whether the price moves up or down.
The profit potential of a straddle is unlimited, but the loss is limited to the amount of the premium paid for the two options. The breakeven point for a straddle is equal to the strike price plus the premium paid.
A straddle is a neutral strategy, meaning that it does not take a position on the direction of the underlying asset's price. It is most effective when the trader believes that the underlying asset is likely to experience a large price movement, but is uncertain of the direction of the movement.
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