How to price straddles using implied volatility

Phunfactory · August 7th, 2014, 3:25 pm

Hello,I'm not sure how I obtain the price of a straddle with strike K when I know its quoted implied volatility.I assume that I just have to use the formula one can find in http://themathpath.com/documents/quanti ... path.pdfat the middle of page 2. Is this the right equation? I couldn't find anything about the market convention on google.Regards

bearish · August 7th, 2014, 10:16 pm

A straddle is just a portfolio of a call and a put with the same strike. No needs for a special straddle formula.