Question

As trader in a volatility market which stratedgy should i choose a STRAP OR straddle ? and why ? give both advantages and disadvantages?

Answer 1

In a volatile market, a trader may choose both STRAP or Straddle. If the trader is a bit bullish, then he should choose STRAP or if the trader thinks that the market will be volatile, but not sure of the direction, then he should choose straddle.

Both strategies will gain if the market is volatile, but if the market is volatile and bullish, then STRAP will gain more as 2 call options are bought for each 1 put option under STRAP, whereas in Straddle only 1 call option is bought for each put option.

If the market is not volatile, then the trader will lose premiums under both STRAP and straddle.

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