Straddle
An options strategy involving the simultaneous purchase (or sale) of a call and a put at the same strike and expiration, betting on large moves (or low volatility).
Formula
Break-even (up) = Strike + Total Premium | Break-even (down) = Strike − Total Premium
A long straddle buys both a call and a put at the same ATM strike and expiration. The position profits if the underlying makes a large move in either direction — the trader doesn't care which way, only that volatility materialises.
A short straddle sells both legs, collecting premium but facing unlimited risk if the stock moves sharply. Short straddles profit when the stock pins near the strike and IV decays.
The straddle price (call + put premium) is a direct market-implied estimate of the expected move for that expiration.
Example
With NVDA at $900 ahead of earnings, a trader buys the $900 call for $30 and the $900 put for $28, paying $58 total ($5,800/contract). The stock must move more than $58 (±6.4%) to be profitable at expiry.
Related Terms
Call Option
An options contract giving the buyer the right to purchase the underlying asset at the strike price before or on expiration.
BeginnerImplied Volatility
The market's forward-looking expectation of volatility, derived by solving the options pricing model for the volatility that matches the observed premium.
AdvancedPut Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
BeginnerStrangle
An options strategy buying (or selling) an OTM call and OTM put at different strikes but the same expiration, cheaper than a straddle but requiring a larger move to profit.
AdvancedVega
The sensitivity of an option's price to a 1-percentage-point change in implied volatility.
Advanced