Editing Straddle (section)

==Short straddle==
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A '''short straddle''' is a non-directional [[options strategy|options trading strategy]] that involves simultaneously selling a put and a call of the same underlying security, strike price and expiration date. The profit is limited to the premium received from the sale of put and call. The risk is virtually unlimited as large moves of the underlying security's price either up or down will cause losses proportional to the magnitude of the price move. A maximum profit upon expiration is achieved if the underlying security trades exactly at the strike price of the straddle. In that case both puts and calls comprising the straddle expire worthless allowing straddle owner to keep full credit received as their profit. This strategy is called "nondirectional" because the short straddle profits when the underlying security changes little in price before the expiration of the straddle. The short straddle can also be classified as a credit spread because the sale of the short straddle results in a credit of the premiums of the put and call.

The risk to a holder of a short straddle position is unlimited due to the sale of the call and the put options which expose the investor to unlimited losses (on the call) or losses limited to the strike price (on the put), whereas maximum profit is limited to the premium gained by the initial sale of the options.  Losses from a short straddle trade placed by [[Nick Leeson]] were a key part of the collapse of [[Barings Bank]].<ref>{{Cite web|url=https://www.next-finance.net/How-Nick-Leeson-caused-the|title=Stories - How Nick Leeson caused the collapse of Barings Bank|first=Paul|last=Monthe|website=Next Finance}}</ref>