Long Straddle / Long Strangle
- Long call and long put at same strike (straddle) or different strikes (strangle) at same expiration
- Unlimited profit potential to upside and downside
- Loss limited to the cost of the straddle or strangle
- Break-even points are the strike plus and minus the value of the straddle, or high strike plus and lower strike minus the value of the strangle
- The definitive position for volatile markets
- Time decay (theta) is your enemy
- The technique called "gamma scalping" can be used with straddles and strangles to offset time decay
Back Spreads
- Long more options than short options
- Unlimited profit potential with limited risk
- This position has net long options, and is long volatility (vega)
- Be aware that a backspread can be initiated for a debit (pay for it) or credit (receive money for it)
- Sluggish stock price movement and time are your enemies
