Straddle (options)
A straddle combines a call and a put with the same strike and expiry. A long straddle profits when the underlying moves far enough in either direction to exceed the premium paid; a short straddle profits when it stays near the strike. The at-the-money straddle price is also the market's quickest gauge of the move it expects to expiry.
Senzoukria · Glossary · Updated September 2026
At a glance
- Construction
- Call + put, same strike, same expiry
- Breakevens (long)
- Strike ± total premium
- Greeks at the money (long)
- Delta near 0, long gamma, long vega, short theta
Payoff and worked example
With the underlying at 100, 20% implied volatility and 30 days to expiry, the 100 call and the 100 put are each worth 2.29 in Black-Scholes with zero rates, so the straddle costs 4.57. At expiry it is worth the absolute distance between the underlying and 100. The buyer breaks even below 95.43 or above 104.57; between them, part or all of the premium is lost, with the maximum loss at exactly 100.
| Underlying at expiry | Straddle value | P&L of buyer |
|---|---|---|
| 90 | 10.00 | +5.43 |
| 95.43 | 4.57 | 0 |
| 100 | 0.00 | −4.57 |
| 104.57 | 4.57 | 0 |
| 110 | 10.00 | +5.43 |
Greeks
At inception the at-the-money straddle has a small delta, 0.023 in the example, because the call's delta slightly exceeds the put's in absolute value. Its gamma is twice an option's, 0.139, its vega 0.229 per volatility point and its theta −0.076 per day. It is therefore a trade on movement and on implied volatility, not on direction: long straddles gain from large realized moves or rising implied volatility, short straddles from quiet markets or falling implied volatility.
The straddle as an implied move
- The price of the at-the-money straddle approximates the expected absolute move to expiry; dividing it by about 0.8 gives a one-standard-deviation move.
- Before a scheduled event, the straddle of the first expiry after it shows what the market charges for the announcement.
- After the event, the straddle's value falls both from time and from the volatility crush, even if the move was large.
On a flow tape
A straddle trade prints as a call and a put on the same strike, usually at the same instant and in the same size. Read leg by leg, it looks like simultaneous bullish and bearish bets. Senzoukria's Option Flow tags prints MULTI when different contracts on the same underlying print with the same size within 25 milliseconds, which covers most straddle executions; the tag is a heuristic and can also group unrelated prints.
Related
In the same section
- Stopping volume
- Strike pinning
- Stop-loss
- Strike
- Stop-limit order
- Survivorship bias
- Stop run
- Systematic strategy
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Frequently asked questions
- Is a long straddle a way to profit whatever the direction?
- Only if the move is large enough. The underlying must travel further than the premium paid, and quickly enough to beat time decay. Most of the time, in markets where implied volatility exceeds realized volatility on average, straddle buyers lose a little; they win large when a big move happens.
- What is the difference between a straddle and a strangle?
- A straddle uses the same strike for the call and the put, usually at the money. A strangle uses an out-of-the-money put and an out-of-the-money call with different strikes, which makes it cheaper but requires a larger move to pay off.