A short straddle is a position that is a neutral strategy that profits from the passage of time and any decreases in implied volatility. The short straddle is an undefined risk option strategy. Credit received from opening trade How to Calculate Breakeven s: Subtract initial credit from Put strike price - Upside: Add initial credit to the Call strike price.

With straddles, it is important to remember that we are working with truly undefined risk in selling a naked call. Implied volatility IV plays a huge role in our strike selection with straddles.

The higher the IV, the more credit we will receive from selling the options. A higher credit ultimately means we will have wider breakeven points, since we can use the credit to offset losses we may see to the upside or downside.

At the end of the day, a larger relative credit results in a higher probability of success with this strategy. Our target timeframe for selling straddles is around 45 days to expiration.

Yahoo! Optionetics Option Trade Finder

Our studies show this is a great balance between shorter and longer timeframes. When do we close straddles?

Short Straddle (Sell Straddle) Explained | Online Option Trading Guide

When do we defend straddles? With premium selling strategies, defensive tactics revolve around collecting more premium to improve our break-even price, and further reduce our cost basis. One option is to roll the whole straddle out in time, using the same strikes.

This can be done for a credit, and we will hope for the stock price to return to our short strike by the new expiration. To reset your password, please enter the same email address you use to log in to tastytrade in the field below. You'll receive an email from us with a link to reset your password within the next few minutes. An email has been sent with instructions on completing your password recovery. Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails.

Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade.

Applicable portions of the Terms of use on tastytrade. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person.

Trading securities can involve high risk and the loss of any funds invested. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance.

Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Trades for 7 days. Join Now Sign In Help Open A Tastyworks.

Straddle Option Strategy | What is an Options Straddle? | tastytrade | a real financial network

Home Watch Live Shows Learn Blog Open A Tastyworks Brokerage Account. About Us Company Info Contact Us Legal Stuff. Helpful Info Help Glossary Cherry Bomb Daily Recaps.

Options Trading Strategies, Option Trading Tips, What is Options Trading?

Personalities Tom Sosnoff Liz Dierking Tony Battista Jenny Andrews Vonetta Logan Pete Mulmat. Our Apps tastytrade Mobile Bob The Trader Where's Bob? Personalities Tom Sosnoff Tony Battista Vonetta Logan.

Our Sites tastytrade Blog. More Bob the Trader Get tasty Store. Add initial credit to the Call strike price tastytrade approach: See All Key Concepts. Join now Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails. Join TastyTrade Free Sign up to get our best stuff delivered to you daily and save videos you want to watch later.