Long Straddle - Profiting From a Big Move Either Way

Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026

A long straddle is an options strategy that buys a call and a put on the same stock, at the same strike price and the same expiration, so it profits if the stock moves far enough in either direction. You pay two premiums up front, and that total is the most you can lose.

The straddle is a bet on the size of a move, not its direction. Call Options Explained and Put Options Explained showed that a call gains when the stock rises and a put gains when it falls. Owning both at one strike means one of them gains whichever way the stock goes. The catch is the price of holding both.

How does a long straddle work?

You buy one at-the-money call and one at-the-money put with the same expiration. At expiration, at most one of them has value: the call if the stock is above the strike, the put if it is below. That one option has to be worth more than what you paid for both.

What are the maximum profit, maximum loss and break-evens?

Each strategy in this module gets the same three answers:

• Maximum loss: the total premium paid, $343 here, if the stock finishes exactly at the strike at expiration.
• Maximum profit: unlimited on the upside, since the call keeps gaining as the stock rises; on the downside it is the strike minus the premium, $4,657 here, if the stock falls to zero.
• Break-evens: the strike minus the total premium and the strike plus the total premium, $46.57 and $53.43.

That last line is the hurdle. XYZ has to move more than $3.43, about 6.9%, by expiration before the straddle makes a cent. The OIC's long straddle guide gives the same break-even formulas and calls this a relatively high hurdle.

How much of a move is a straddle pricing in?

The straddle's cost is the market's price for movement. If you think XYZ will move more than $3.43 by expiration, the straddle looks cheap to you; if you think it will move less, it looks expensive.

The free profit calculator shows a related number, the expected move (1σ): the range that implied volatility says the stock has about a 68% chance of staying within. For XYZ at $50 with 30 days and 30% IV, that is about $4.30. The at-the-money straddle, $3.43, is about 80% of it. That ratio is a property of the pricing model, not a coincidence: under Black-Scholes assumptions, an at-the-money straddle is worth about 0.8 times the one-standard-deviation move. Course 3's Earnings and Event Strategies module goes further into reading priced-in moves.

What works against a long straddle?

Two forces cost you money while you wait for the move: time and volatility.

Time decay. You own two options, so you pay two options' worth of theta. In the calculator's pricing model, this straddle loses about $5.70 per day at the start (the call's theta plus the put's), and the daily loss grows as expiration nears. If XYZ sits at $50 for 15 days, the straddle drops from $343 to about $243: $100 gone with nothing happening. Values before expiration add up each leg's model price rounded to the cent, which is how the calculator's Auto premiums show them.

Falling implied volatility. The straddle is long vega: about +$11.40 per point of implied volatility. If IV drops from 30% to 20% right after you buy, the straddle is worth about $229 with the stock unchanged, a loss of $114. That is the risk the Course 1 lesson IV Crush After Earnings describes, applied to two options at once. The reverse is also true: a rise to 40% IV would lift it to about $457.

Direction barely matters at the start. The call's delta (about +0.53) and the put's (about -0.47) nearly cancel, leaving the straddle with a net delta of about +7 shares. As the stock moves, gamma tilts it toward the winning side.

When do traders buy straddles?

The usual setup is a known event with an unknown outcome, such as earnings; the OIC guide's description mentions an important court ruling expected in the next quarter. The problem is that everyone knows the date, so implied volatility tends to be high going in, and the straddle is expensive exactly when the setup looks best.

A straddle makes sense when your expected move is bigger than the one the premium implies, not merely when you expect "a big move". A few habits help:

• Compare your move with the break-evens. Write down how far you expect the stock to move, then compare that with the straddle price.
• Know the IV you are paying. A straddle bought at a high IV needs the stock to move and IV to hold up, or a move large enough to beat both.
• Plan the exit. Many traders close straddles before expiration, selling both legs once the move comes, or when decay has taken an amount they set in advance.