what does straddle mean?
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Thread: what does straddle mean?

  1. #1
    Heard the word before... what exactly does straddle mean? give an example

  2. #2
    If they activate the two orders you will be efficiently hedging (provided you not using a USA based broker), when you currently hedging it means you are going to need to start looking for the best chance to close 1 order in favour of this one you believe will be profitable.

    When you hedging you will be down variety of pips equivalent to you gap (space between two orders)

    Just an additional 2 Cents on an old post

  3. #3

  4. #4
    Investopedia says:
    Straddles are a good egy to pursue if an investor believes that a stock's price will move considerably, but is unsure as to which direction. The stock price must move significantly if the investor is to make a profit. As shown in the diagram above, should only a little movement in price happen in either direction, the investor will experience a loss. As a result, a straddle is extremely risky to perform. Additionally, on stocks which are expected to jump, the market tends to price options at a higher premium, which reduces the expected payoff should the stock transfer significantly.

    This definition says stocks, but may be implemented to forex as well. I am aware this is often used before large news releases to capitalize on the massive movement. But this egy ought to be used with caution because of the risk of the price one way and then spiking another way. This may trigger the market position and also the buy position, which is bad.



    BTW, the definition came from here:
    http://www.investopedia.com/terms/s/straddle.asp

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