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Short Straddles for Beginners: Options Learning Center
Description
The short straddle strategy anticipates volatility to decrease and the underlying security to trade within a specific price range. The short straddle option strategy involves selling a call and a put option at identical strike prices.
Maximum loss can be significant if the underlying security aggressively moves in either direction. Maximum profit is the premium received for the short call and short put (Net Credit).
The short straddle strategy succeeds if the underlying security is trading within the range between the downside breakeven (strike - Net Credit) and upside breakeven (strike + Net Credit) at expiration. Maximum profit is achieved if the underlying security lands at the strike price at expiration.
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