Straddle
A long straddle combines a call and a put at the same strike and expiration. It is designed to benefit from a sufficiently large price move in either direction.
Key Facts
- Market Outlook
- Expects a large price move but has no view on its direction.
- Construction
- Buy a call and a put with the same strike and expiration. Opened for a net debit equal to both premiums combined.
- Max Profit
- Upside: unlimited — profit keeps growing as the underlying rises above the upper breakeven. Downside: capped at the strike minus the net debit, reached only if the underlying falls to zero.
- Max Loss
- The net debit, if the underlying finishes exactly at the strike.
- Breakeven(s)
- Two: strike − net debit, and strike + net debit.
- At Expiration
- The loss is largest at the strike and shrinks one-for-one as the underlying finishes farther away in either direction.
Per share, at expiration (at the near-term expiration for calendar and diagonal spreads). Assumes the position is held until then and ignores commissions, taxes, dividends and early assignment.
Built for a Big Move
Long straddle — a call and a put at the same strike, profiting from a large move either way.
Illustrative example — not live market data.
Manual Market — Go Beyond a Single Expiration
Manual Market lets you set expiration dates independently for each leg and model positions with your own inputs — without depending on OptionLab's built-in US or Israel market data. Explore more advanced positions shaped by both price and time.
Related Strategies
How It Works
A long straddle buys one call and one put at the same strike and the same expiration. Both premiums are paid up front, and that combined cost is the most the position can lose.
Profit potential increases as the price moves sufficiently far in either direction — enough to cover both premiums paid on whichever side moves. The straddle has two breakeven points, one above and one below the strike.
Worked Example
This example uses its own inputs and is separate from the illustrative chart above.
- Underlying price: $100
- Time to expiration when premiums were calculated: 30 days
- Implied volatility: 25%
- Risk-free rate: 5%
- Premiums: theoretical values from OptionLab's Black-Scholes function — the same model as OptionLab's Black-Scholes Calculator. They are not live market quotes.
- Results: calculated at expiration by OptionLab's exact payoff engine.
- Amounts: per share. Contract-level amounts depend on the contract multiplier — for example, multiply by 100 for standard US equity options.
| Leg | Option | Strike | Premium |
|---|---|---|---|
| Buy 1 | Call | $100 | $3.06 |
| Buy 1 | Put | $100 | $2.65 |
| Net Debit | Max Profit | Max Loss | Breakevens |
|---|---|---|---|
| $5.71 | Unlimited (upside) | $5.71 | $94.29 and $105.71 |
At expiration: At exactly $100, both options expire worthless and the full $5.71 is lost. Each dollar the underlying finishes away from $100 recovers $1, so the position is profitable below $94.29 or above $105.71. Upside profit is unlimited. On the downside, profit is capped at $94.29 per share — the $100 strike minus the $5.71 debit — reached only if the underlying falls to zero.
Build a Straddle in OptionLab
OptionLab has a built-in Long Straddle strategy template (a Short Straddle template is also available for the opposite view). OptionLab builds the two-leg structure for you, and you can adjust the strike to match your view. From there, you can see the payoff graph and breakeven points — since the upside on a long straddle isn't capped, OptionLab reflects that directly rather than showing a fixed maximum profit.
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