Long Straddle options strategy
A long straddle buys an at-the-money call and put. It profits from a sufficiently large move in either direction but loses from time decay if price stays near the strike.
- Market outlook
- High volatility
- Construction
- Buy one call and one put at the same strike and expiry.
- Maximum risk
- Total premiums paid.
- Maximum reward
- Unlimited upside; substantial downside potential.
- Breakeven at expiry
- Strike plus or minus total premium.
Strategy questions
- What is a Long Straddle?
- A long straddle buys an at-the-money call and put. It profits from a sufficiently large move in either direction but loses from time decay if price stays near the strike.
- What is the maximum risk of a Long Straddle?
- Total premiums paid.
Risk note
Options are leveraged and expire. Model payoff at multiple prices and volatility levels in the Options Strategy Lab before considering a position.