Abstract:

Utilisation of option strategies on the financial market falls within the category of sophisticated approaches of investment portfolio administration. This issue is also approached by significant hedging funds, primarily for the reason of the clearly defined risk and profit potential. The possibility of buying and selling of the CALL and PUT options creates space for generation of several types of options strategies from less sophisticated to highly sophisticated ones. This article will analyse the Long Straddle (LS) option strategy, used when a big move of a share in any direction is expected. The outcome of the article is an analysis of the size of price moves after earnings announcement and the possibility to use this fundamental fact for an increased profit generated by the LS strategy.