GLOSSARY // Options
Straddle
A straddle is a long call and a long put at the same strike and expiration, almost always at the money. It is a pure bet on movement: the position profits if the stock travels far enough in either direction to cover both premiums.
The cost of the straddle defines the required move. Breakevens sit at the strike plus and minus the total premium, and everything between them at expiration is a loss zone. Straddle buyers fight theta on two contracts at once and are heavily exposed to IV crush after events, which is why the actual move has to beat the implied move for the trade to work.
A stock trades at $100. You buy the 100 call for $3.20 and the 100 put for $3.00 — $6.20 total, $620 per straddle. Breakevens: $106.20 and $93.80. A move to $110 makes the call worth $10.00 for a $380 profit; a drift to $98 leaves only the put's $2.00 of intrinsic value and a $420 loss.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.