Business and Personal Finance Dictionary

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• STRADDLE
  
  A straddle is an options-buying strategy that lets you profit from the potential price changes of a particular stock, stock index, or commodities futures contract without actually speculating on whether the price will move up or down. To use a straddle, you buy an equal number of put options (to sell a particular underlying investment) and call options (to buy the same underlying investment) at the same strike price. On or before the expiration date, at a point at which your potential profit on one half of the straddle outweighs your potential loss on the other half, you can exercise, or offset, the options, making more on one than you lose on the other. That spread, or difference in price, minus what the options cost you, is your profit. Although straddling costs more than buying puts or calls alone, you may increase your chance of making money (and reduce your chances of losing money) by hedging your investment in this way.
  
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