What is the difference between the top and hang myself?


Captures and strangles are both options strategies that allow the investor to gain from significant moves up or down in the share price. Both strategies consist of buying an equal number of call options and put options with the same expiry date. The difference is that the strangle has two different strike prices, while the straddle and the total exercise price.

For example, the company is scheuled to release its latest earnings results after three weeks, but you have no idea whether the news will be good or bad. This is a good time for the conclusion of a run, because when you release results, the stock move sharply higher or lower.

Suppose the stock is trading at $15 in April. Suppose the call option of $15 for the month of June has a price of $2, while the price of the option is $15 for June is $1. Apart is achieved by and purchase call and put for a total amount of $300: ($2 + $1) x 100 shares in an options contract = $300. Straddle will increase in price if the stock moves higher (because of the call option), or if the stock goes down (due to the long option). Profit is achieved, while the price of a stock moves more than $3 per share in either direction.

A straddle does not have a directional bias, to strangle is used when an investor believes that shares are more likely to move in a certain direction, but still wish to be protected in case of a negative turn.

For example, let’s say you believe that the results will be positive, so you need less protection fault. Instead of buying a put option with a strike price of $15 per $1, maybe you look at buying a 12.50 $hit that has a price of $0.25. It will cost less than the straddle, and require a smaller move up for You to break even. Using the lower strike put in this strangle will still protect you from excessive falling, and also puts you in a better position to obtain a positive announcement.

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