Straddle Legal Definition
With highly volatile stocks or commodities likely to make big moves, investors may want to hedge because they don`t know which way the investment will move. The use of a straddle allows the investor to spread the risk, avoid a total loss, but also exclude the maximum profit that comes with a cheap put or call. The investor knows that the put or call option is not exercised in a straddle, so a key factor in assessing potential profit is the cost of buying the put versus the cost of buying. A straddle is the purchase of a call and put with the same strike price, expiration date and underlying security. For example, buying a National Widget November 95 Call and buying a National Widget November 95 Put at the same time, when the share price is around 95, would be an overlap. An overlap is a type of options contract that gives the contract holder the option to buy or sell the securities or commodities specified in the contract or not to buy or sell. Understanding how an overlap works requires a basic understanding of the options. An option is a type of contract used in stock and commodity markets, in the rental and sale of real estate, and in other areas where one party wants to acquire the legal right to buy or sell something from another party within a certain period of time. In equity and commodity markets, an options strategy consisting of an equal number of put options and call options on the same underlying futures contracts on stocks, indices or commodities. (1) See propagation; (2) an option position consisting of the purchase of put and call options with the same expiry date and strike price.
In the stock and commodity markets, there are options in two main forms called “calls” and “puts”. A call gives the holder the opportunity to buy shares or a commodity futures contract at a fixed price for a specified period of time. A put gives its holder the opportunity to sell shares or a commodity futures contract at a fixed price for a set period of time. 1565, in the intransitive sense 1 An option consists of four components: the underlying security, the type of option (put or call), the strike price and the expiry date. Take, for example, a “National Widget November 100 Call.” National Widget shares are the underlying security, November is the expiration month of the option, 100 is the strike price (sometimes called the strike price), and the option is a call that gives the holder of the call option the right, not the obligation, to buy 100 shares of National Widget at a price of 100 (any number of shares can be involved, But usually, options are sold for 100 shares or multiples of 100). In the language of stockbrokers, the term refers to the double privilege of a “put” and a “call” and guarantees the holder the right to demand from the seller within a certain period of time a certain number of shares of certain shares at a certain price or to ask him to take the same shares at the same price within the same period. Securities to simultaneously place a contract to buy and sell a commodity or stock in anticipation of a price change in order to take advantage of volatile trading. See also a hedge.