Hi All, I want to know what is a straddle strategy in terms of Futures and options trading ?
I have been reading up on Barings bank for a college presentation and it says that straddle strategy was used. I can’t find a clear explanation for that. Thanks in advance.
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ELI5:
You know that the stock is gonna make a *big* move but you aren’t sure whether it will be up or down. Maybe it’s close to an announcement for their new drug trial and if it was successful you expect the stock to shoot up but if it was a failure you expect the company to be in trouble.
Therefore, to capture the value from this *big* move you make a bet with one person that the price will go up and then you make another bet that it will go down, you pay a fee(premium) to make these bets and then wait for the announcement.
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