Long straddle
Buy an at-the-money call and an at-the-money put. The position gains from a large move in either direction.
How it is built
- Buy 1 lot of the at-the-money call.
- Buy 1 lot of the at-the-money put, same strike and expiry.
A structure for a view that the index will move a lot, without a view on the direction, for example around a scheduled event.
Risks
- Both premiums are lost if the index ends at the strike.
- The index has to move by more than the combined premium just to break even.
- Implied volatility often falls after an event, which lowers both options even if the index moved.
How the Greeks behave
- Delta
- Close to zero at the start
- Theta
- Strongly negative
- Vega
- Strongly positive
Worked example on Nifty 50
| Leg | Premium per unit | Cash flow |
|---|---|---|
| Buy 1 lot 25,000 CE | ₹209.21 | −₹13,599 |
| Buy 1 lot 25,000 PE | ₹178.07 | −₹11,575 |
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Long straddle on other indices
Frequently asked questions
What is the break-even of a long straddle?
The strike plus the combined premium on the upside, and the strike minus the combined premium on the downside.
What is the maximum loss?
The combined premium paid, if the index ends exactly at the strike at expiry.
Why can a straddle lose money after a big event?
Option prices often include the expected move before the event. When the uncertainty is gone, implied volatility drops and the options lose value.