Long Straddle | PFG Futures

Long Straddle

Class: Precision

Synthetics: Long call A, Long put A. Long calls A, Short instrument

Long puts A, Long instrument

(All done to initial delta neutrality. A delta neutral spread is a ratio spread established as a neutral position by using the deltas of the options involved. The neutral ratio is determined by dividing the delta of the

written option)

Long Straddle | PFG Futures

When to use:

If market is near A and you expect it to start moving but are

not sure which way. Especially good position if market has

been quiet, then starts to zigzag sharply, signaling potential


Profit Characteristics:

Profit open – ended in either direction. At expiration, break-

even is at A, plus or minus cost of spread. However, position is

seldom held to expiration because of increasing decay levels

with time.

Loss Characteristics:

loss limited to cost of spread (assuming most common version,

the call-put spread). Maximum loss incurred if market is at

A at expiration.

Decay Characteristics:

Decay accelerates as options approach expiration. For this

reason, position is adjusted to neutrality by frequent profit-

taking. It is normally taken off well before expiration.

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