Straddle Calculator

A long straddle is the purchase of a call and a put at the same strike and expiration, usually at the money. It profits from a large move in either direction, with risk limited to the total premium paid. It expresses a view that the stock will move more than the options market expects, and it is also called buying a straddle.

Big move either wayWants rising IVIntermediateUnlimited profitLimited risk
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How the long straddle works

Position legs

Building Long Straddle

Rates, dividends and costs
Long Straddle payoff diagram-$500$0$500$1,000$1,500$2,0007580859095100105110115120125UNDERLYING PRICE AT DATENOW 100.00BE 92.88BE 107.12

Long Straddle at a glance

ConstructionBuy 1 at the money call and buy 1 at the money put, both in the front month expiration.
OutlookBig move either way
Volatility viewWants rising IV
Max profitUnlimited on the upside, where profit equals stock price minus strike minus total premium, times 100.
Max lossTotal premium paid for both options, times 100.
BreakevenUpper breakeven equals strike plus total premium.
Experience levelIntermediate
Also calledBuy straddle

How a long straddle works

A long straddle is a bet on movement, not direction. If the stock rallies, the call gains while the put shrinks toward zero; if it falls, the put gains while the call fades. Either way, the winning leg must gain more than the combined premium of both options for the trade to profit. Traders often read the price of an at the money straddle as the market's estimate of the move by expiration, so buying one is a bet that the actual move will be larger.

At expiration the payoff is a V shape centered on the strike. The maximum loss, the full premium, happens only if the stock closes exactly at the strike. There are two breakevens: the strike plus the total premium and the strike minus the total premium. Beyond them, profit grows one for one with the stock, without limit on the upside and up to the strike minus the premium on the downside.

Before expiration, time decay is the main enemy, because you own two at the money options that both lose value every day the stock sits still. Implied volatility is the other big driver: the position gains if volatility rises, even without a move, and can lose heavily if volatility collapses after an earnings release. Many straddle buyers enter before a catalyst and exit soon after, so plan the exit as carefully as the entry and check the Greeks before you commit.

Long Straddle example with real numbers

Long Straddle payoff diagram-$500$0$500$1,000$1,500$2,0007580859095100105110115120125UNDERLYING PRICE AT DATENOW 100.00BE 92.88BE 107.12
Long Straddle payoff diagram: profit and loss at expiration (solid) and today (dashed) for the example below. Yellow dots mark breakevens.

With the stock at $100, implied volatility at 30%, a 4.1% risk free rate and no dividend, you would buy 1 100 call (32 days) at $3.73, buy 1 100 put (32 days) at $3.39. That is a net debit of $712. At expiration a maximum profit of unlimited and a maximum loss of $712, with breakevens at $92.88 and $107.12. The lognormal chance of profit is 42%.

These are theoretical American option prices from the Bjerksund and Stensland model, not live quotes. Load any ticker in the long straddle calculator above to run the same math on real market prices.

When to use a long straddle

  • You expect a large move but are unsure of the direction, such as before earnings or a court ruling.
  • Implied volatility looks low relative to how much you think the stock will move.
  • You expect implied volatility itself to rise before you plan to exit.
  • You want defined risk exposure to a breakout from a long trading range.

Max profit, max loss and breakeven

Maximum profit

Unlimited on the upside, where profit equals stock price minus strike minus total premium, times 100. On the downside, profit is capped at strike minus total premium, times 100, if the stock goes to zero.

Maximum loss

Total premium paid for both options, times 100. You lose all of it only if the stock closes exactly at the strike at expiration.

Breakeven

Upper breakeven equals strike plus total premium. Lower breakeven equals strike minus total premium.

Long Straddle Greeks

  • Delta: Delta starts near zero, since the call's positive delta and the put's negative delta roughly cancel. It turns positive on a rally and negative on a decline.
  • Gamma: Gamma is strongly positive and peaks near the strike close to expiration. This is what lets the position gain from movement in either direction.
  • Theta: Theta is strongly negative because both options are at the money. The daily cost of holding the straddle rises as expiration approaches.
  • Vega: Vega is strongly positive. A rise in implied volatility lifts both legs, while a volatility crush after an event can hurt even when the stock moves.

See the live numbers for your position in the Greeks tab of the calculator, or explore a single option in the options Greeks calculator.

Early exercise and assignment risk

Early exercise is rarely right for a long straddle, because both legs usually carry meaningful time value and selling them captures it. The exceptions come after a large move. If the stock has rallied and an ex dividend date is near, the deep in the money call may hold less time value than the dividend, and exercising it the day before the ex date can be worth more than selling. If the stock has collapsed and rates are high, the deep in the money put may be worth exercising once its time value is nearly gone.

Exercising either leg changes the position. Exercising the call leaves you long 100 shares plus the put, which is now a protective put. Exercising the put without owning shares leaves you short 100 shares plus the call. At expiration, whichever leg is in the money is exercised automatically, so you will end up with a stock position unless you close first. Because the strike is often close to the final price, sell the in the money leg before the closing bell if you do not want shares.

The calculator's Early exercise risk tab flags short legs that are likely to be assigned. For a single option, use the early exercise calculator or read how early exercise and assignment work.

Pros and cons

Pros

  • Profits from a big move in either direction.
  • Risk is limited to the premium paid.
  • Upside profit is unlimited and downside profit is large.
  • Gains from rising implied volatility even before the stock moves.

Cons

  • Expensive, since you pay for two at the money options.
  • Heavy time decay erodes value every day the stock is quiet.
  • Implied volatility often falls after the event you are trading, cutting the value of both legs.
  • Needs a move larger than the market already expects just to break even.

How to manage a long straddle

  • Compare the straddle's cost with the stock's typical move on similar past events before entering.
  • Set a time stop, since holding a quiet straddle into the final weeks accelerates decay.
  • After a strong move, sell the winning leg or roll it to lock in gains while keeping the other leg as a cheap hedge.
  • Exit soon after the catalyst if the move is smaller than expected, before volatility falls further.

Long Straddle FAQ

When do traders use a long straddle?

Traders use a long straddle when they expect a large move but do not know the direction, often ahead of earnings, product news or legal decisions. The trade only works if the move exceeds the total premium. It works best when implied volatility is low relative to the move that follows.

Long straddle vs long strangle: what is the difference?

A long straddle buys a call and a put at the same strike, while a long strangle buys an out of the money call and put at different strikes. The straddle costs more but needs a smaller move to profit. The strangle is cheaper but needs a larger move to reach its breakevens.

What is the maximum loss on a long straddle?

The maximum loss on a long straddle is the total premium paid for both options, times 100. It occurs only if the stock closes exactly at the strike at expiration. In practice, most straddle losses come from time decay and falling volatility well before expiration.

Why can a straddle lose money after earnings?

A straddle can lose money after earnings because implied volatility falls sharply once the news is out. If the stock's move is smaller than the move the options had priced in, the volatility crush outweighs the gain on the winning leg. Comparing the straddle's cost with the expected move before the event helps you judge this risk.

Educational tool, not financial advice. Calculations are theoretical and depend on your inputs; real fills, fees, early assignment and dividends can change results. Options involve risk and are not suitable for every investor.