advancedMedium RiskVolatile
Straddle
Buy a call and put at the same strike. Profit from a big move in either direction.
What is a Straddle?
A long straddle buys both a call and a put at the same strike and expiration. You pay a hefty premium but profit if the stock makes a large enough move in either direction. The ideal catalyst is an event with a larger-than-expected move (earnings, FDA decision, macro data).
When to use it
Use when you expect a big move but don't know the direction. Best before high-impact events. Avoid when IV is already elevated (you'll overpay and get crushed by IV collapse post-event).
Structure
Buy 1 ATM call + buy 1 ATM put, same strike and expiration.
Key Metrics
Max Profit
Unlimited to the upside, stock price − strike − premium paid to the downside.
Max Loss
Total premium paid (if stock pins exactly at strike at expiration).
Breakeven
Strike + total premium (upper) and strike − total premium (lower).
Greeks Profile
Delta: near zero (directionally neutral). Gamma: high (responds quickly to moves). Theta: strongly negative. Vega: strongly positive.
Tips & Best Practices
- 1Buy straddles before big events, not the day of (IV spikes make them expensive).
- 2Use expected move (EM) to determine if the straddle is fairly priced.
- 3A straddle costs the expected move — so you need to beat the market's expectation.
- 4Close one side if the stock makes a big move — "delta hedge" to lock in profits.
See it in action
Model a Straddle with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Straddle Calculator →