Making Money With Option Strategies

11 Straddles Hedged

Hedges apply in a vast number of flexible strategies. Among these, some of the most intriguing fall into the realm of the straddle, a strategy most often described as highly speculative. When properly constructed, the straddle provides a conservative hedge for portfolio positions.

Key Point

The straddle can be designed not just as a set of speculative offsetting positions, but as the more effective hedge attained by combining two low-risk positions.

This hedge may be long or short, and can also be set up with adjustments in terms of both strike and expiration. The straddle, as a flexible strategy, can be configured as a highly speculative trade or as an appropriately conservative hedge. Just as spreads are intended primarily ...