Long Straddle
Buying a call and put at the same strike and expiration to seek a large move in either direction.
What is a Long Straddle?
Buying a call and put at the same strike and expiration to seek a large move in either direction.
Construction
Buy one call and one put at the same strike and expiration.
When it may be studied
To study a non-directional view that realized movement may exceed the move priced into the premiums.
Expiration profile
Maximum risk: Total premium paid
Maximum reward: Unlimited upside; substantial downside payoff toward zero
Break-even: Strike plus or minus total premium
Worked example
Buy a 100 call and 100 put for a combined $8. Simplified expiration break-evens are $108 and $92. A move inside that range produces some or all of the debit loss.
Key risks and limitations
The position can lose even when the underlying moves if the move is too small, too late, or accompanied by falling implied volatility.
Entry and exit checklist
- Confirm contract multiplier, expiration, exercise style, settlement, and liquidity.
- Calculate the maximum loss under the intended structure.
- Review earnings, dividends, corporate actions, and other event risks.
- Define an exit, adjustment, or expiration plan before entry.
- Understand what happens if one leg is assigned or exercised early.