Long Straddle

Buy a call and a put at the same strike to profit from a big move in either direction.

A long straddle buys a call and a put at the same strike and expiry. It's a pure bet on a large move — direction doesn't matter, magnitude does.

Market outlook

You expect a big move but are unsure which way (earnings, FDA decision, major data) — or you expect implied volatility to rise.

Construction

• Buy 1 call at strike $K$ for $P_c$.
• Buy 1 put at strike $K$ for $P_p$.
• Total cost $D = P_c + P_p$.

Risk / reward

• Max loss: $D$, if the stock pins exactly at $K$ at expiry.
• Max profit: large in both directions.
• Breakevens: $\text{BE}_{up} = K + D, \qquad \text{BE}_{down} = K - D$

When to use it

• Ahead of a known catalyst where the move could be violent.
• When you believe realized volatility will exceed the (priced-in) implied volatility.

Risks & management

• IV crush is the killer: after the event, IV often collapses and can erase gains even on a real move. The stock must move more than the premium implies.
• High theta — straddles bleed quickly. They are short-duration trades, not buy-and-hold.