What is a long straddle, in plain words?
A long straddle is buying a call and a put with the same strike and expiry 1. It gains if the stock moves far enough in either direction; the most it can lose is the two premiums paid 1. It breaks even at the strike plus the premiums and at the strike minus them 1.
A $50 call and a $50 put, both with 30 days left at 30% implied volatility (made-up numbers). Move where the stock ends at expiry.
In numbers
By the formula the call costs $1.80 and the put $1.63 2: $3.43 a share together. So at expiry the pair comes out ahead only below $46.57 or above $53.43 1: a move of more than 6.9% either way in 30 days.
Time and volatility
Time decay works hard against a straddle, and a rise in implied volatility helps it 1. Before a company reports, implied volatility tends to be high and to fall after 3, so a straddle bought before the news is bought at that higher implied volatility, and a fall after the news lowers both options' value.
What this shows, and what it doesn't
The result at expiry, a share, before fees and the bid-ask spread on two options.
Go further
Sources (3), checked 20 October 2026 and 27 October 2026
- The Options Industry Council, “Long Straddle”. Read it (read 27 October 2026)
- Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities”, Journal of Political Economy 81(3), 637–654, 1973. Read it (read 20 October 2026)
- Andrew Dubinsky and Michael Johannes, “Earnings Announcements and Equity Options”, working paper, Columbia Business School, citing Patell and Wolfson (1979, 1981). Read it (read 20 October 2026)
Now try it on a scenario of your own
Pick where a simulated stock might be, and by when: drag one dot and see, side by side, what buying shares, one option, or a pair of options (a call or put spread) would each do. Free, no sign-up.
Check a trade before you make it →