Straddle Purchase: Purchase Both A Put (S=50) And Call (S=50) On The Same Strike
Risk: Limited-at strike
Profit Potential: Unlimited-both upside and downside
Equivalent Positions: Reverse Hedge (Short Stock/Long 2 Calls)
Follow-up Action: On a large stock move look for a transition into a combination
Butterfly Spread: Sell Two Calls Near Stock Price (S=50), And Buy Calls On Lower (S=45) And Higher Strikes (S=55)
Risk: Limited-both up & down
Profit Potential: Limited-at middle strike
Equivalent Positions: Covered Straddle Write & Butterflies established with puts or call/put combo
Follow-up Action: None
Combination-Strangle: Buy Out Of The Money Call (S=55) And Put (S=45)
Risk: Limited-between strikes
Profit Potential: Unlimited-both up and down
Equivalent Positions: None
Follow-up Action: Similar to straddle purchase
