Advanced Strategies for Options trading success

Long straddles involve buying a call and put with the same strike price and expiration date. This strategy profits if the underlying stock price moves substantially in either direction. The example shows buying an $80 call for $3.75 and put for $3.25, for a total cost of $7. If the stock price rises or falls by $4 in one week, the value of the $80 straddle is estimated to change from $7 to either $7.50 or $6.87 respectively. For this strategy to be profitable, the forecast must predict a large price change, larger than $4, in the underlying stock within one week.