Trade Blog :: Sales & Marketing » Straddle http://www.directorytrade.com/blog Mon, 28 Dec 2009 03:16:36 +0000 en hourly 1 http://wordpress.org/?v=3.0 Options Trading Mastery: Factors that Affect Straddle Prices http://www.directorytrade.com/blog/options-trading-mastery-factors-that-affect-straddle-prices/ http://www.directorytrade.com/blog/options-trading-mastery-factors-that-affect-straddle-prices/#comments Thu, 27 Dec 2007 09:11:25 +0000 Mohamed Egner http://www.directorytrade.com/blog/?p=10 Since the Straddle’s profit potential depends on its price from purchase time to expiration, the investor should be aware of the factors that affect the Straddle;s price. Several factors affect a Straddle’s price. The first is, of course, stock price. The stock’s price dictates the value of both components of the Straddle – the call and the put – affecting the Straddle price as a whole. As the stock price moves, the prices of the call and the put will fluctuate via the current Deltas of the options and thereby affect the price of the Straddle.

The implication to the buyer and seller is obvious. The passage of time decreases the value of the Straddle and thus always favors the seller. Time works against the buyer. The buyer has until expiration to get either a large stock or implied volatility movement to offset the price paid for the Straddle.

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