Options Strategies
Long Straddle
Strategies Long Straddle
Component Buy call, buy put of the same strike price/level and month
Potential Profit
  • When the stock price/index level is below the lower break-even point, substantial and equals to lower break-even point minus stock price/index level
  • When stock price/index level is above the upper break-even point, unlimited and equals to stock price/index level minus upper break-even point
Maximum Loss Total premium paid
Time Value Impact Negative
  • The lower break-even point equals to strike price/level minus total premium paid
  • The upper break-even point equals to strike price/level plus total premium paid
Remarks Compared with Short Butterfly which has limited profits, Long Straddle has substantial profit on the downside and unlimited profit on the upside. Compared with Long Strangle, Long Straddle is more expensive to establish but requires less market volatility to be profitable.
  Net Position +1 Jul 200 Put +1 Jul 200 Call

Component Buy ABC Jul $200 Put, pay $15, and buy ABC Jul $200 Call, pay $10
Net Premium Pay $10+$15=$25
  • Lower: $200-$25=$175
  • Upper: $200+$25=$225
Profit when Stock price is below $175 or above $225
Potential Profit
  • When the stock price is below $175, $175 - stock price
  • When the stock price is above $225, stock price - $225
Potential Loss $25
Time Value Impact Negative