The reason I’ve sought to bring your attention to the various
strategies is to show how each strategy is such a unique tool. Much like
hydrogen and oxygen combine to form a unique substance (water), putting options
together into various combinations results in some amazingly unique risk/reward
profiles.
Buy an at-the-money call or a put and the chances are good that
you will loose all your money (stops notwithstanding). However, buy a
straddle (both a call and a put at the same strike price and expiration month)
and the possibility of losing all your money is practically nil (the underlying
would have to finish precisely on the strike price)......
