• In option trading, buying 1 call and 1 put with the same exercise price, maturity and underlying asset. This position benefits if the price of the underlying asset turns out to be volatile. Also referred to as buying volatility. Strangle is similar to a straddle except the exercise prices of the call and put are different.
• Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: spread
• Is an option strategy where the near-or at-the money put and call are combined to form a position. The straddle can be long (purchased) or short (sold).
| ||Embedded terms in definition|
| ||Referenced Terms|
| ||Long straddle: A Straddle in which a long position is taken in both a put and call option.|
| ||Option trading strategies: Can be market directional, volatility directional, market neutral, volatility neutral, time value capture, time value payment, and numerous variants of the aforementioned. The basic building blocks are puts and calls. These puts and calls can be American Style or European Style. They can be ordinary plain vanilla -or exotic. Among the latter are: Asian, Binary, Lookback, Knockin and Knockout. There are many other structures as well. Some specific strategies are: Backspreads, Bear, Box, Bull, Butterflies, Condors, Conversion, Credit, Debit, Diagonal, Fence, Guts, Horizontal, Purchased Call, Purchased Put, Ratio, Reverse Conversion, Sold Call, Sold Put, Straddles, Strangles, Synthetic Long Call, Synthetic Long Futures or Underlying, Synthetic Long Put, Synthetic Long Straddle, Synthetic Short Call, Synthetic Short Futures or Underlying, Synthetic Short Put, Synthetic Short Straddle, Vertical, and Volatility. There are also compound and nested options or strategies. Among these are: call-on-a-call, a call-on-a-put, a put-on-a-put, and a put-on-a-call.|
| ||Security: Any claim that trades in the marketplace. Stocks, bonds, negotiable CDs, bankers acceptances are examples of securities. A bank loan is a private contract and it can not be bought or sold. Hence, it is not a security.According to the Securities Exchange Act of 1934, a security is any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, Straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited. |
A simpler definition is that a security is a piece of paper that can be assigned a value and sold, or any investment made with the expectation of a profit.Piece of paper that proves ownership of stocks, bonds and other investments.
| ||Short straddle: A Straddle in which one put and one call are sold.|
| ||Spread: The difference between the price paid for a security by the investment banker and the sale price.(1) Difference between bid and asked prices on a security. (2) Difference between yields on or prices of two securities of differing sorts or differing maturities. (3) In underwriting, difference between price realized by the issuer and price paid by the investor. (4) Difference between two prices or two rates. What a commodities trader would refer to as the basis.In a quote, the difference between the Bid and the Ask prices of a security. The spread for a company's stock is influenced by a number of factors, including supply or float (the total number of shares outstanding available to trade); demand or interest in a stock; or total trading activity in the stock. (2) An options position established by purchasing one option and selling another option of the same class, but of a different series.Is the simultaneous purchase and sale of two related instruments. This strategy tries to transform outright price risk into a basis or relationship risk position. It is also viewed as the difference between the bid and the offer or the profit margin.(1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a Straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.|
| ||Related Terms|
| ||Long straddle|
Synthetic long straddle
Synthetic short straddle
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