Straddle Options Calculator

A straddle is an options strategy that involves buying (or selling) both a call option and a put option with the same strike price and expiration date on the same underlying asset. A long straddle profits when the stock makes a large move in either direction, while a short straddle profits when the stock stays near the strike price. Straddles are commonly used around earnings announcements, FDA decisions, and other events where significant price movement is expected but direction is uncertain.

A straddle has two breakeven points because it can profit from moves in either direction. Upper Breakeven = Strike Price + Total Premium Paid (call premium + put premium). Lower Breakeven = Strike Price - Total Premium Paid. For example, if you buy a $100 strike straddle for $8 total ($5 call + $3 put), your breakevens are $108 and $92. The stock must move beyond one of these prices for a long straddle to profit at expiration.

A long straddle means buying both a call and put—you pay premium upfront and profit from large price swings in either direction. Max loss is limited to the premium paid. A short straddle means selling both options—you collect premium upfront and profit if the stock stays near the strike price. Short straddles have limited profit (the premium collected) but theoretically unlimited loss if the stock moves significantly. Long straddles are bullish on volatility; short straddles are bearish on volatility.

For a long straddle: Maximum profit is theoretically unlimited on the upside (as the stock can rise indefinitely) and substantial on the downside (limited only by the stock going to zero). Maximum loss is the total premium paid, which occurs if the stock closes exactly at the strike price at expiration. For a short straddle: Maximum profit is the total premium collected, and maximum loss is theoretically unlimited on the upside or substantial on the downside.

Use a long straddle when you expect a big move but don't know which direction—common before earnings reports, product launches, FDA approvals, or major economic announcements. The implied volatility should ideally be low when you enter (cheaper premiums). Use a short straddle when you expect the stock to trade sideways with low volatility. Short straddles work best on stable, range-bound stocks where you can collect premium as time decay works in your favor.

Both strategies profit from large price movements and involve buying (or selling) a call and put with the same expiration. The key difference is strike selection: a straddle uses the same strike price for both options (usually at-the-money), while a strangle uses different strikes (usually out-of-the-money). Strangles cost less than straddles but require a larger move to profit. Straddles have a higher probability of profit but cost more upfront.

Implied volatility (IV) directly impacts straddle pricing. Higher IV means higher premiums for both calls and puts, making straddles more expensive to buy. This is why straddles often seem attractive before events—the IV is already elevated. After the event, IV typically drops (volatility crush), which can cause a long straddle to lose money even if the stock moves, because the options lose value faster than the intrinsic value gained. Short straddle sellers benefit from volatility crush.

An ATM (at-the-money) straddle uses a strike price equal to or very close to the current stock price. This is the most common type of straddle because ATM options have the highest time value (extrinsic value) and are most sensitive to price movements. ATM straddles are considered 'delta neutral' at entry, meaning they don't favor upward or downward movement—they simply need the stock to move significantly in either direction.

The straddle price represents the market's expected move for the underlying stock. To calculate the implied move percentage: divide the straddle price by the strike price, then multiply by 100. For example, if a $100 strike straddle costs $8, the implied move is 8% ($8 ÷ $100 = 0.08 = 8%). This means the market expects the stock to move roughly ±8% by expiration. If you think the stock will move more than the implied move, a long straddle may be attractive.

Long straddle risks: paying too much premium (especially in high IV environments), time decay working against you every day, and the stock not moving enough to overcome the premium paid. Short straddle risks: theoretically unlimited losses if the stock makes a large move, margin requirements, and assignment risk. Both strategies require careful position sizing and risk management. Short straddles are considered high-risk and are not suitable for inexperienced traders.