The Straddle and Strangle: Harvesting Volatility
ยท 4 min read
Most retail traders spend their entire careers trying to predict whether the market will go up or down. They draw trendlines, analyze earnings, and guess. Quantitative analysts, however, understand that predicting direction is incredibly difficult. Predicting movement, on the other hand, is highly probabilistic.
When the market structure indicates that a massive move is imminent, but the direction is unknown, academic traders deploy the Straddle or the Strangle. These twin strategies are the ultimate weapons for harvesting explosive volatility.