Long Straddle options strategy
A long straddle buys a call and a put at the same strike, profiting from a large move in either direction. The combined premiums paid are the maximum loss.
How the long straddle is built
Buy the 200 call for 8 and the 200 put for 8, for a total debit of 16.
Profit and loss at expiration
The expiration payoff is calculated as: Profit = max(S − 200, 0) + max(200 − S, 0) − 16.
- Maximum profit
- Large — unlimited on the upside and up to strike − debit on the downside.
- Maximum loss
- Limited to the total premium paid = $16 per share, at the strike.
- Breakeven
- Strike ± total debit = 184 and 216.
Worked example
At an expiration price of 225, payoff = 25 − 16 = $9 per share.
When to use it
Use it ahead of a catalyst (earnings, data, decisions) when you expect a big move but are unsure of direction.
Managing the risk
If the move is too small, both options decay and you can lose the full premium. Elevated implied volatility makes it expensive.
Frequently asked questions
When is a long straddle profitable?
When the underlying moves far enough beyond either breakeven to exceed the combined premium paid.
What hurts a long straddle?
A quiet market and falling implied volatility, which erode both options.
Model this strategy
Open the free OptCurve calculator to plot the long straddle payoff, mark breakevens, and overlay it with other strategies.
Open the P&L calculator