Straddle
An options strategy buying both a call and a put at the same strike price and expiration, profiting from a large price move in either direction.
A straddle is an options strategy that combines buying a call option and a put option on the same underlying asset, at the same strike price and expiration date. Because the position profits from a large price move in either direction — up through the call, or down through the put — a straddle is a bet on volatility itself rather than on which direction the price will move, and it loses money if the price stays close to the strike through expiration, since both options would expire worthless or close to it.
A straddle is commonly used ahead of an event expected to cause a large price swing, such as a major protocol upgrade or regulatory announcement, where the trader is confident volatility will spike but isn't confident about the direction. The total cost of both premiums paid sets the breakeven threshold the underlying price needs to clear, in either direction, for the position to become profitable.
Examples
- A trader expecting a major price swing around a scheduled network upgrade, but unsure of the direction, might buy a straddle to profit regardless of which way the price moves.
- A straddle loses value if the underlying price stays close to the strike through expiration, since neither the call nor the put ends up meaningfully in the money.