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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Buying a call and a put at the same strike and expiration to profit from a big move in either direction.
Why It Matters
A straddle is a bet on magnitude, not direction. You win if the stock moves sharply up OR down - you just need the move to be bigger than the combined premium you paid. That's why straddles are commonly placed before earnings or FDA decisions, where big moves are expected but the direction is uncertain.
Key Points
- You profit when the stock moves more than the total premium paid - in either direction
- The enemy is a flat stock: if price stays near the strike, both legs decay toward zero
- IV crush after the catalyst can hurt even when the stock moves - buy before IV spikes, not after
Learn More
Calls vs Puts Explained
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
Buying a call and a put at the same strike and expiration to profit from a big move in either direction. A straddle is a bet on magnitude, not direction. You win if the stock moves sharply up OR down - you just need the move to be bigger than the combined premium you paid.
A straddle is a bet on magnitude, not direction. You win if the stock moves sharply up OR down - you just need the move to be bigger than the combined premium you paid. That's why straddles are commonly placed before earnings or FDA decisions, where big moves are expected but the direction is uncertain.
You profit when the stock moves more than the total premium paid - in either direction
The enemy is a flat stock: if price stays near the strike, both legs decay toward zero
IV crush after the catalyst can hurt even when the stock moves - buy before IV spikes, not after