Definition of straddle

The origin of the word "straddle" can be traced back to the 14th century, originally with the meaning of "to make a stride." This meaning came from the Old English word "straðlan," which meant "walker" or "traveler." In Middle English, the word "straðle" emerged, meaning "to journey on foot." As the word evolved in the 16th century, it came to be associated with a seated position, specifically, "to spread one's legs wide apart, so as to straddle a horse, horseman's side-saddle, or chair." This sense of the word is believed to have developed from the earlier meaning because a straddle position is similar to a wide stride. In the context of finance and investing, "straddle" refers to an options trading strategy in which an investor simultaneously purchases both a put and a call option for the same underlying asset, with the same expiration date and exercise price. The goal of this strategy is to profit from significant volatility in the underlying asset price, as the value of both options will increase if the price of the underlying asset moves significantly in either direction.