Long Straddle
Buy a call and a put at the same strike. You profit from a big move in either direction.
Payoff at expiration
When traders use it
Before events (e.g., earnings) when you expect a large move but not its direction.
Formulas (per share; ×100 per contract)
| Max profit | Unlimited (upside); K − total premium (downside) |
| Max loss | Total premium (C + P) |
| Breakeven | K + total premium and K − total premium |
Key risks
Expensive; time decay and IV crush after events can cause losses even after a move.
How it works
Buy a call and a put at the same strike and expiration. One of them will have value at expiration if the stock moves; you profit if the move exceeds the total premium paid in either direction.
Worked example HYPOTHETICAL
Hypothetical example only — not real prices or a recommendation. Stock at $100. Buy $100 call ($4.00) and $100 put ($4.00). Total $8.00 ($800).
| Stock price at expiration | P/L (1 contract, excl. fees) |
|---|---|
| $80 | +$1,200 |
| $92 | $0 |
| $100 | −$800 |
| $108 | $0 |
| $120 | +$1,200 |
Market outlook: when to use it
Use when: Expect a large move but unsure of direction, with implied volatility relatively cheap.
Avoid when: Right before earnings when IV is already high — the post-event IV crush often makes straddles lose even after a move.
The Greeks, in plain words
| Delta | Near zero at entry; becomes directional as the stock moves. |
| Theta | Strongly negative: both options decay. |
| Vega | Strongly positive. |
| Gamma | Strongly positive. |
Choosing strikes and expiration
At the money. Expiration just past the expected catalyst, or longer to reduce decay.
Managing the trade
Close once the move happens; don’t wait for expiration. Exit if nothing happens and decay mounts. Long options are not assigned.
Common mistakes
- Buying when IV is inflated.
- Underestimating how big the move must be (here ±8%).
FAQ
Breakevens?
$92 and $108.
Max loss?
$800, if the stock is exactly $100 at expiration.
Explained simply
When would someone use this?
When you expect a big move but do not know which way, such as around an event.
The setup, in plain words
Buy one call and one put at the same strike and expiration, usually at the money.
Max profit, max loss and breakeven
- Max profit
- Unlimited on the upside; large on the downside (strike − total premium).
- Max loss
- The total premium paid, if the stock ends exactly at the strike.
- Breakeven
- Two breakevens: strike ± total premium.
A simple numeric example (hypothetical)
Stock at $100. Buy the $100 call for $4 and the $100 put for $4: total $8 ($800). Breakevens are $92 and $108. Stock at $120: call worth $20, profit $1,200. Stock at $100: both expire worthless, loss $800.
The main risks, in plain words
- You pay for two options, so it is expensive.
- Time decay hits both options.
- After an expected event, implied volatility often falls, which can hurt even if the stock moves.
Beginner FAQ
Straddle or strangle?
A straddle costs more but needs a smaller move; a strangle is cheaper but needs a bigger move.
Read next
What Is Implied Volatility (IV)? · How to Read the Option Greeks · All Learn articles
Related strategies
Long Strangle · Iron Condor · Long Call
Watch: further explanation
Long Straddle Options Strategy (Best Guide w/ Examples!) — projectoption