When the traders or investors are confidant of big price movement ahead, but are not clear about the direction; they use Straddle or Strangle strategy. These are delta neutral strategies employed to capitalize from the volatility & time decay. Straddles and Strangles strategies are effective in both volatile & non volatile market conditions. In volatile markets, Long Straddles & Strangles can benefit from the sharp price fluctuations. In non volatile markets, Short Straddles & Strangles can benefit from the range bound price fluctuations. Buying a Straddle or Strangle has limited risk, while selling a Straddle or Strangle has unlimited risk. Long Straddles & Strangles can be used by novice traders. While, veteran traders & big players of the market use Short Straddles & Strangles.
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