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Straddle

March 3, 2018

Similar to a collar without being long the underlying. To profit there must be a large movement in either direction.

Value at expiration: Vt = max(0, St – X) + max(0,X-St)

Profit: ∏ = Vt – (Co + Po)

Breakeven: St* = X ± (Co + Po)

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