Short Straddle

Description

Selling both a Call and a Put at the same strike price.

Trading Logic

Bets on low volatility. Theoretically unlimited risk.

Practical Example

Stock at $100. Sell $100C ($8) and $100P ($8). Total premium: $16.

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P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss