# Straddle

> A straddle buys or sells a call and put at the same strike and expiry. Learn how long straddles profit from big moves, short ones from calm, and the implied move.

Source: https://learn.tradelabsai.com/options/straddle/  
Track: Options · Level: Advanced · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Straddle", https://learn.tradelabsai.com/options/straddle/

A straddle combines a call and a put with the same strike and expiration. Buying both, a long straddle, profits if the underlying makes a large move in either direction. Selling both, a short straddle, profits if the underlying stays near the strike. Straddles are the purest options bet on volatility: direction does not matter, only the size of the move compared with what the market has priced in.

## Long straddle

| Feature | Long straddle |
|---|---|
| Construction | Buy at the money call + buy at the money put |
| Outlook | Big move, direction unknown |
| Maximum loss | Total premium paid (if the price ends exactly at the strike) |
| Maximum gain | No cap on the upside; large on the downside |
| Break evens | Strike ± total premium |
| Greeks | Long gamma, long vega, negative theta |

*Figure: Long straddle at expiration.*

**Example: A long straddle before an event**
A stock trades at $100 ahead of a major product announcement. You buy the $100 call for $4.20 and the $100 put for $3.80, total $8.00 ($800).

- **Stock at $115 at expiry:** call worth $15, put worthless. Profit: $700.
- **Stock at $88:** put worth $12. Profit: $400.
- **Stock at $104:** call worth $4. Loss: $400.
- **Break evens:** $92 and $108. The stock must move more than 8% either way.

## The implied move

The price of an at the money straddle is a quick estimate of the move the market expects by expiration:

```
implied move ≈ straddle price / stock price
```

In the example, $8 / $100 = 8%. A long straddle profits at expiry only if the actual move exceeds the implied move. Traders compare implied moves with past moves around similar events to judge whether straddles are cheap or expensive. See [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/) and [Implied Volatility (IV)](https://learn.tradelabsai.com/volatility/implied-volatility/).

## Short straddle

| Feature | Short straddle |
|---|---|
| Construction | Sell at the money call + sell at the money put |
| Outlook | Little movement, falling volatility |
| Maximum gain | Total premium received |
| Maximum loss | No cap on the upside; large on the downside |
| Greeks | Short gamma, short vega, positive theta |

Short straddles collect large premiums but carry large, uncapped risk. Most traders who want this exposure use an iron butterfly, which adds protective wings. See [Iron Butterfly](https://learn.tradelabsai.com/options/iron-butterfly/).

## Volatility crush

Straddles bought before events often lose money even when the stock moves, because implied volatility falls after the news. If the move is smaller than the implied move, both the price change and the volatility drop work against the long straddle. See [Volatility Crush and Expansion](https://learn.tradelabsai.com/volatility/volatility-crush-and-expansion/).

## Managing straddles

**Long straddles**
- **Close early** if a big move happens; there is no reason to wait for expiry.
- **Gamma scalp:** delta hedge as the price swings to lock in gains. See [Gamma Scalping](https://learn.tradelabsai.com/options/gamma-scalping/).
- **Exit before decay accelerates** if the move has not come.

**Short straddles**
- **Take profits** at a fraction of the credit.
- **Hedge delta** as price moves away from the strike.
- **Set strict loss limits.**

## Straddle vs strangle

A strangle uses an out of the money call and put instead of at the money options. It is cheaper but needs a bigger move. See [Strangle](https://learn.tradelabsai.com/options/strangle/).

## Common mistakes

- **Buying straddles when implied volatility is already very high.**
- **Holding long straddles to expiry,** letting time value decay.
- **Selling naked straddles** with too much size.
- **Ignoring the implied move** when judging value.

## Frequently asked questions

### What is a straddle in options?

Buying or selling a call and a put with the same strike and expiration. A long straddle profits from big moves; a short straddle profits from small ones.

### How do you calculate straddle break evens?

Add and subtract the total premium from the strike. For a $100 straddle costing $8, the break evens are $92 and $108.

### Why do straddles lose money after earnings?

Because implied volatility falls after the announcement. If the move is smaller than the implied move, the straddle loses value despite the price change.

Next, learn the cheaper cousin, the [Strangle](https://learn.tradelabsai.com/options/strangle/).

## Continue learning

- Next lesson: [Strangle](https://learn.tradelabsai.com/options/strangle/)
- Previous lesson: [Butterfly Spread](https://learn.tradelabsai.com/options/butterfly-spread/)
- Related: [Butterfly Spread](https://learn.tradelabsai.com/options/butterfly-spread/): A butterfly spread buys one option, sells two at a middle strike and buys one higher. Learn the payoff, why it is cheap, broken wing variants and how to use it.
- Related: [Strangle](https://learn.tradelabsai.com/options/strangle/): A strangle buys or sells an out of the money call and put. Learn how it compares with a straddle, break evens, strike choices and the risks of short strangles.
- Related: [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/): Earnings trading positions around quarterly company reports. Learn how expectations, guidance and implied moves drive reactions, and the main strategies.
- Related: [Gamma Scalping](https://learn.tradelabsai.com/options/gamma-scalping/): Gamma scalping buys options and repeatedly delta hedges to lock in gains from price swings. Learn how it works, the break even move and when it pays.
- Related: [Iron Butterfly](https://learn.tradelabsai.com/options/iron-butterfly/): An iron butterfly sells an at the money straddle and buys wings for protection. Learn the payoff, how it compares with an iron condor and how to manage it.
- Related: [Implied Volatility (IV)](https://learn.tradelabsai.com/volatility/implied-volatility/): Implied volatility is the market's forecast of future movement, backed out from option prices. Learn how to read it, convert it to expected moves and use it.