{"id":24994,"date":"2021-11-03T15:55:12","date_gmt":"2021-11-03T20:55:12","guid":{"rendered":"https:\/\/i2020i.com\/?p=24994"},"modified":"2021-11-03T22:20:23","modified_gmt":"2021-11-04T03:20:23","slug":"earning-stock-option-play-straddle-lyft-and-abnb","status":"publish","type":"post","link":"https:\/\/i2020i.com\/?p=24994","title":{"rendered":"Earning Stock Option play – Straddle -LYFT and ABNB"},"content":{"rendered":"\n

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The Long Straddle<\/h2>\n\n\n\n

A long straddle is a simple yet sophisticated options position that involves buying both at the money call and put, where the strike price<\/a> of both options is close to the current stock price, with the same expiration date, usually going past the earnings date.<\/p>\n\n\n\n

The theory behind the long straddle is that the buyer of the position expects a high degree of volatility after the company releases earnings, but they are unsure in which direction the price will change.<\/p>\n\n\n\n

The long straddle provides positive exposure to a significant price move in either direction, with a chance to profit as long as the price change is large enough to cover the premiums regardless of the direction of the change.<\/p>\n\n\n\n

With this strategy you have two break even spots with the first one being the strike price plus<\/em> the net debit paid and the other being the strike price minus<\/em> the net debit paid.<\/p>\n\n\n\n

So for example, if you bought a long straddle on Netflix with a strike price of $195 for a net debit of $17.45 ($1,745 total cost) then your breakeven points would be $212.45 and $177.55. You would need the stock to move above or below those prices in order to be profitable but keep in mind that theta <\/a>(time decay) and implied volatility<\/a> will affect prices before earnings are announced.<\/p>\n\n\n\n