Straddles

What this video covers

• Why a straddle combines different classes (one call plus one put) while a spread uses the same class, and how the exam baits you on this distinction
• The structure of a long straddle: buy a call and buy a put, same strike, same expiration, paying two premiums for a volatility bet
• Why the maximum loss on a long straddle occurs only when the stock closes exactly at the strike price, not "near" it
• The short straddle setup, why the writer wants zero movement, and why selling the naked call piece creates unlimited upside risk
• Upside breakeven (strike plus total premiums) and downside breakeven (strike minus total premiums), and why these are identical for the buyer and the seller
• Why the long straddle profits outside the breakevens and the short straddle profits between them, even though the numbers match
• How time decay works against the long straddle buyer and in favor of the short straddle writer