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Volatile market trading strategies are appropriate when the investor believes the market will move but does not have an opinion on the direction of movement of the market. As long as there is significant movement upwards or downwards, these strategies offer profit opportunities. A investor need not be bullish or bearish. He must simply be of the opinion that the market is volatile. This market outlook is also referred to as "neutral volatility."

A straddle is the simultaneous purchase (or sale) of two identical options, one a call and the other a put.

	Profit	Unlimited
	Loss	Limited to the Net Premium received
	Break Even	Expecting a Large breakout, uncertain about the direction
	Use	Volatility increase improve the position
	Formation	Buying Call (A)
		Buying Put (A)

Long Call Same Exercise Price		Long Put Same Exercise Price
Position	Buyer	Position	Writer
Spot Price	2080	Spot Price	2080
Strike Price	2090	Strike Price	2090
Premium Received	Rs. 32	Premium Received	Rs. 17
Break-Even	2090 + 32 = 2112	Break-Even	2090 – 25 = 2065

Pay-off Structure of Long Straddle :

Possible NIFTY Index	Net Premium Paid	Profit/Loss on Long Put (B)	Profit/Loss on Short Put (A)	Net Profit/Loss	Remarks
2020	57	-32	45	13	In-The-Money
2030	57	-32	35	3	In-The-Money
2040	57	-32	25	-7	Out-The-Money
2050	57	-32	15	-17	Out-The-Money
2060	57	-32	5	-27	Out-The-Money
2070	57	-32	-5	-37	Out-The-Money
2080	57	-32	-15	-47	Out-The-Money
2090	57	-32	-25	-57	Out-The-Money
2100	57	-22	-25	-47	Out-The-Money
2110	57	2	-25	-37	Out-The-Money
2120	57	-8	-25	-27	Out-The-Money
2130	57	-18	-25	-17	Out-The-Money
2140	57	-28	-25	-7	Out-The-Money
2150	57		-25	3	In-The-Money
2160	57		-25	13	In-The-Money

	Pay-off Graph of Short Straddle :

Interpretation:

	To "buy a straddle" is to purchase a call and a put with the same exercise price and expiration date.

	An investor, viewing a market as very large breakout than he should: Buy option straddles. A "straddle sale" allows the investor to profit from Buying calls and puts in a stable market environment. Here the investor taking Long position on both Call and Put with the strike price of Rs. 2090.

	The investor's profit potential is unlimited. If the market Breakout with uncertain direction, investors long in-the-money calls or puts will let their options expire Profitable. So, if the market is in very large breakout than he is gain from it. Here below the 2030 he is in profit and above the 2140 he is in the profit.

	The investor's potential loss is limited. That is the net premium paid for taking the buying position of both Call and a Put. He pays the net premium is (32 + 25) = 57. so it is the maximum loss for it.

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