Long Straddle

A long straddle is a strategy that enables the holder of an option to make a profit based on the movement of the underlying asset, regardless of the direction of that movement.

To employ a long straddle strategy, one would purchase both a long call option and a long put option on an underlying asset at the same strike price. If the price of the underlying asset moves significantly from the strike price of the option, then the investor makes a profit, whether the price moves up or down. A long straddle is a good position to take if the investor believes that a certain underlying asset will be particularly volatile. This is a limited risk, unlimited profit potential strategy. The most an investor can lose is the cost of the options, while the amount of money they can make is nearly unlimited.