Ads end in 20 seconds
This content is free thanks to our sponsors
Sponsored Ad – I may earn a commission if you click and buy
Investment
Straddle
Buying both a call and a put at the same strike price to profit from a big move in either direction.
Straddles are used when you expect a large move but don’t know the direction. They are expensive because you pay two premiums, so implied volatility must expand after the event for the trade to profit.
It's buying tickets for both teams to win — you profit no matter which way the price explodes.
Real world: Before a major earnings report you buy a straddle on a stock at £50 strike. If the stock jumps to £60 or crashes to £40 you make big profit from the winning side. The loser expires worthless but the winner pays for both.
💡 Straddles are perfect for big news events where something dramatic is almost guaranteed to happen.