Question 1

What is a Short Straddle?

Accepted Answer

You sell (short) an ATM Call and sell (short) an ATM Put, both at the same strike

Question 2

What is the max loss of a Short Straddle?

Accepted Answer

The max loss is Theoretically unlimited minus the credit received for selling the Straddle.

Question 3

When do I breakeven when utilizing a Short Straddle strategy?

Accepted Answer

The breakeven is defined as Strike Price plus the Premium (credit) received or minus the Premium (credit) received.

Question 4

What is the typical application of a Short Straddle?

Accepted Answer

The typical applicatio is: 1. Speculate on decreasing volatility and a slightly-increasing to slightly-decreasing price.