> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/option-strategies/straddle.md).

# Straddle

## Long Straddle

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A Long Straddle is the simultaneous purchase of an ATM Call and an ATM Put, with the same strike price and expiration.
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**Payoff Diagram:**

![](/files/8HHzPvbov5jRGK7v7qIw)

**Direction Assumption:** Neutral

**Maximum Profit:** Unlimited 

**Maximum Loss:** Limited to net debit paid.\
Maximum Loss occurs when the underlying is at the option strike at expiration, where both the Long Call and Long Put expires worthless.

**Breakeven Price:** \
• On the lower end, option strike minus the net debit paid.\
• On the higher end, option strike plus the net debit paid.

**Theta:** Passage of Time -> Negative Effect\
The net effect of time decay is negative. 

**Volatility:** \
If Volatility decreases -> Negative Effect.\
If Volatility increases -> Positive Effect. \
\
Long Straddles are Vega positive, meaning that if volatility increases, the position gains value.\
Therefore, Long Straddles are best to be entered when volatility is relatively low.

## Short Straddle

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A Short Straddle is the simultaneous sale of an ATM Call and an ATM Put, with the same strike price and expiration.
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**Payoff Diagram:**

![](/files/7WELXM5LyxRBS9Xoqy33)

**Direction Assumption:** Neutral

**Maximum Profit:** Limited to net credit received.\
Maximum Profit occurs when the underlying is at the option strike at expiration, where both the Short Call and Short Put expires worthless.

**Maximum Loss:** Unlimited

**Breakeven Price:** \
• On the lower end, option strike minus the net credit received.\
• On the higher end, option strike plus the net credit received.

**Theta:** Passage of Time -> Positive Effect\
The net effect of time decay is positive. 

**Volatility:** \
If Volatility decreases -> Positive Effect.\
If Volatility increases -> Negative Effect. \
\
Short Straddles are Vega negative, meaning that if volatility increases, the position loses value.\
Therefore, Short Straddles are best to be entered when volatility is relatively high.