A long straddle buys a call and a put at the same strike to profit from a large move in either direction — often used around earnings or major events.
Open the Long Straddle calculator →Buy a straddle when you expect a large move but are unsure of the direction — for example around earnings, a court ruling, or a product launch. You buy a call and a put at the same at-the-money strike, profiting from a big swing either way.
The key question is whether the move will be larger than the combined premium plus any drop in implied volatility, because you have effectively paid for two options.
A straddle bought before earnings can lose even if the stock gaps, because implied volatility collapses afterwards and deflates both options — the infamous IV crush. The stock must move more than the market already priced in.
Maximum loss is the total premium, reached if the stock sits still; the two breakevens are the strike plus and minus the combined premium.
Use the free OptionProfit Long Straddle calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
Most likely IV crush — the move was smaller than the implied move, so the drop in volatility outweighed the price change.
A straddle uses the same at-the-money strike (costlier, needs a smaller move); a strangle uses OTM strikes (cheaper, needs a bigger move).
When you expect a big move and implied volatility is still relatively low, so you are not overpaying before the event.
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