Search a symbol to visualize the potential profit and loss for a straddle option strategy.
What is a straddle?
A straddle is an easy to understand volatility strategy that allows you to profit from moves in either direction. Since it involves buying both a call and a put, it is an expensive strategy and needs a big move to cover its cost.
Time is harmful to this strategy since it is made up of long options, but volatility is your friend. You may consider buying a straddle before earnings to profit off any big move after earnings (but keep IV crush in mind!), or to take advantage of the rising IV before earnings.
- Buy a put at strike A
- Buy a call at strike A