I have heard the term straddle when referring to options many times. What would it mean if I wanted to enter into a straddle position?
A straddle is an options strategy in which one "buys" or "sells" options of the same series (same expiration and same strike price). The "buyer" or "seller" profits based on how much the price of the underlying security moves, regardless of the direction of price movement.
IE: A long straddle would be:
You buy a call and a put of the same series (same expiration and same strike price). Your expiration profit would be if the underlying moves more than the premium paid for the straddle.
Profit = ABS[Expiry Level - Strike Price] - (Premium Paid for Bought Options)
Came across this very nice video which explains the "Long Straddle". Thought will share the link here: http://www.khanacademy.org/finance-economics/core-finance/v/long-straddle