The Long Straddle, also known as buy straddle or simply "straddle", is a neutral strategy in options trading that involve the simultaneously buying of a put and a call of the same underlying stock, striking price and expiration date.
Buy 1 call and 1 put with the same strike price and expiration date.
Long Straddle options are unlimited profit, limited risk options trading strategies that are used when the options trader thinks that the underlying securities will experience significant volatility in the near term.
Unlimited Profit Potential
By having long positions in both call and put options, straddles can achieve large profits no matter which way the underlying stock price heads, provided the move is strong enough.
Unlimited on the upside. On the downside, profit is capped because the stock cannot fall below zero.
Limited Risk
Maximum loss for Long Straddles occurs when the underlying stock price on expiration date is trading at the strike price of the options bought. At this price, both options expire worthless and the options trader loses the entire initial debit taken to enter the trade.
The total premiums paid for the call and put.
Breakeven Point(s)
There are 2 break-even points for the Long Straddle position. The breakeven points can be calculated using the following formulae.
Upper breakeven: strike price plus the total premiums paid. Lower breakeven: strike price minus the total premiums paid. The lower breakeven exists only if the result is zero or above.
Example
Suppose XYZ stock is trading at $40 in June. An options trader enters a Long Straddle by buying a JUL 40 put for $200 and a JUL 40 call for $200. The net debit taken to enter the trade is $400, which is also his maximum possible loss.
If XYZ stock is trading at $50 on expiration in July, the JUL 40 put will expire worthless but the JUL 40 call expires in the money and has an intrinsic value of $1000. Subtracting the initial debit of $400, the Long Straddle trader's profit comes to $600.
On expiration in July, if XYZ stock is still trading at $40, both the JUL 40 put and the JUL 40 call expire worthless and the Long Straddle trader suffers a maximum loss which is equal to the initial debit of $400 taken to enter the trade.
These examples use standard U.S. stock options with a 100-share contract size and matching expiration dates. Related structures can use ETF, index or futures options, but contract multipliers, exercise style, settlement and the underlying price range can differ. A stock’s zero price floor must not be assumed for every futures contract.
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Commissions
For ease of understanding, these examples exclude commissions, fees and financing costs. Include all costs when comparing an actual position; there is no universal commission amount.
For active traders, transaction costs can consume a significant part of returns. Compare the full commission and fee schedule, exercise and assignment charges, and bid-ask spreads. The cost of entering and closing every leg matters.
Similar Strategies
The following strategies offer related market exposure. Compare their construction, cost, maximum loss and assignment obligations; a similar outlook does not mean identical risk.
Short Straddle
The converse strategy to the Long Straddle is the Short Straddle. Short Straddles are used when little movement is expected of the underlying stock price.
Modified Straddles
There are two modifications of the straddle strategy, the Strap and the Strip, which can be implemented to introduce a bullish or bearish bias to the risk/reward curve.
Before expiration and assignment
The diagrams and worked outcomes describe expiration payoffs, not an option’s market price before expiration. Time decay, implied volatility, rates, dividends and bid-ask spreads affect early closing values. American-style short options can be assigned early; a protective long option is not automatically exercised when a short leg is assigned. Closing or exercising one leg can change the remaining position’s risk.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
Compare This Strategy
Optional further reading to help you compare the tradeoffs.
- Long Straddle vs Long Strangle — Compare the move needed to recover the whole premium, not just the cost of each option.
- Long Straddle vs Strip vs Strap — Choose whether the view is balanced or favors one direction, then account for the extra premium at risk.
Short-term options applications
Explore Short-Term Options Trading to see how weekly, 1DTE and 0DTE expirations affect timing, price sensitivity and expiration risk. Availability and settlement depend on the selected product and series.
