Strategy reference
Long Straddle
A long straddle is a two-leg position that profits from a large move in either direction. You buy both a call and a put at the same strike; your only loss case is the stock barely moving.
Structure
Buy one call and one put at the same strike, both expiring on the same date. Your cost equals the two premiums added together.
Payoff at expiration
At expiration, your profit equals how far the stock has moved away from the strike — in either direction — minus the total premium you paid. Your worst case is losing the entire premium, which happens if the stock finishes exactly at the strike. You have two breakevens: the strike plus your premium, and the strike minus your premium. Above the strike, gains are theoretically unlimited as the stock rises.
- Stock price
- $100
- Buy
- 1 × $100 call @ $3.50
- Buy
- 1 × $100 put @ $3.50
- Net cost (debit)
- $7.00
- Max gain
- Unlimited above $107 / capped at $93 below
- Max loss
- $7.00 at S = $100
- Breakevens
- $93.00 and $107.00
Frequently asked questions
What is a long straddle?
A long straddle is a two-leg debit position: buy both a call and a put at the same strike, same expiration. It profits from a large move in either direction.
What are the breakevens on a long straddle?
There are two breakevens: the strike plus the total premium (upside) and the strike minus the total premium (downside). Outside this range, the position is profitable at expiration.
What is the maximum loss on a long straddle?
The maximum loss is the total premium paid for both legs. It occurs if the stock finishes exactly at the strike at expiration.
This page is an educational reference, not investment advice. Numbers in the worked example are approximations for illustration only — real option prices depend on volatility, interest rates, dividends, and time to expiration. See the full disclaimer for details.