Question

What are long & short straddle, long & short strap, long & short strip?

Differences between and diagram for each.

Answer 1

LONG STRADDLE

A long straddle is an options strategy comprised of purchasing both a long call and a long put on the same underlying asset with the same expiration date and strike price.

SHORT STRADDLE

A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date.

LONG STRADDLE	SHORT STRADDLE
In this strategy, the trader believes that the price of underlying asset will change sharply, but the direction it will change is unknown.	In this strategy, the trader believes that the price of underlying asset will neither move upwards nor downwards.
The strike price is at-the-money or as close to it as possible. The options are held for a longer period.	The options are held for a shorter period.
The long straddle is useful when an investor wants to profit from either a bullish or bearish move in the underlying security.	The short straddle is useful when an investor holds strong views about the steadiness of the market .
In this strategy, as calls benefit from an upward move, and puts benefit from a downward move, the small moves of underlying security are cancel out, therefore the profit comes from a very strong move, usually triggered by a newsworthy event, in either direction by the underlying asset.	The maximum profit is the amount of premium collected by writing the call and put options.
The risk in this strategy occurs when there is least or no volatility in the market. In this case the investor loses money when the options expire even before the options get executed.	The risk in this strategy occurs when there high volatility in the market in which the investor is forced to buy or sell actual shares thereby creating loss to the investor.

LONG STRAP

A long strap is an options strategy is similar to long straddle just that it is comprised of using two call options and one put options on the same underlying asset with the same expiration date and strike price.

SHORT STRAP

A short strap is an options strategy is similar to short straddle just that it is comprised of selling two call options and one put option with the same strike price and expiration date.

The strap strategies are similar to straddle just that the straps are comprised of more call options than put options. It is bullish version of straddle.

LONG STRAP	SHORT STRAP
In this strategy, the market is expected to be high volatile, but the direction it will change is unknown.	In this strategy, the market is said to be in steadiness.
The strike price is at-the-money or as close to it as possible. The options are held for a longer period.	The options are held for a shorter period.
The long strap attains more profit than long straddles when the market is highly volatile, as there are more call options than put options. is useful when an investor wants to profit from either a bullish or bearish move in the underlying security.	The short strap attains more profit than short straddles when the market is least volatile, as there are more call options than put options.
In this strategy, when the market is in upward move, the gain is very high ad as calls benefit from an upward move.	The maximum profit is higher than that of short straddle due to more call options.
The risk in this strategy occurs when there is least or no volatility in the market. In this case the investor loses money when the options expire even before the options get executed. But, in this the risk is controlled and is lesser than that of long straddle.	The risk in this strategy occurs when there high volatility in the market in which the investor is forced to buy or sell actual shares thereby creating loss to the investor. But, in this the risk is controlled and is lesser than that of short straddle.

LONG STRIP

A long strip is an options strategy is similar to long straddle just that it is comprised of using one call option and two put options on the same underlying asset with the same expiration date and strike price.

SHORT STRIP

A short strap is an options strategy is similar to short straddle just that it is comprised of selling one call option and two put options with the same strike price and expiration date.

The strap strategies are similar to straddle just that the straps are comprised of more put options than call options. It is bearish version of straddle. The risk is limited to the total option premium paid plus brokerage & commission.

LONG STRIP	SHORT STRIP
In this strategy, the market is expected to be high volatile, but the direction it will change is unknown.	In this strategy, the market is said to be in steadiness.
The strike price is at-the-money or as close to it as possible. The options are held for a longer period.	The options are held for a shorter period.
The long strip attains unlimited profit on the downward price movement of the underlying asset, as put options are benefited as they move downwards.	The short strip attains more profit than short straddles as it writes more put options when compared to straddles.