Long straddle strategy — how it works
A long straddle profits from a big move in either direction. Learn how to build and practise a straddle on Nifty Paper Trade.
A long straddle is buying a call and a put at the same strike and expiry (usually at-the-money). You profit when the underlying makes a big move in either direction — up or down — so it's a classic pre-event or high-volatility play.
Payoff
- Max loss: the total premium paid (both options) — if the price barely moves.
- Profit: unlimited on a large move either way, once the move exceeds the combined premium.
- Breakevens: strike ± total premium.
How to build it
- Open the Strategy Builder.
- Buy an ATM Call and Buy an ATM Put (same strike/expiry).
- Check the payoff diagram, then deploy both legs together.
When traders use it
Ahead of big events (results, budget, RBI) when a large move is expected but the direction is unclear. The risk: if the market stays flat, time decay erodes both premiums.
FAQ
What's the difference between a straddle and a strangle?
A straddle uses the same strike for both legs; a strangle uses out-of-the-money strikes (cheaper, needs a bigger move).
What's the maximum loss?
The total premium you paid for the call and put — no more.
When is a straddle a bad idea?
When you expect a quiet, range-bound market — time decay works against you.