Long Straddle

A Long Straddle is a neutral strategy, betting on a big move in the underlying stock price, so it’s a high volatility play. Ideally, it’s constructed from a long at-the-money call (red) and a long put with the same strike (green). Peak losses occur at the strike, with gains on both sides of the strike if the underlying moves sufficiently far away from the strike. It exhibits limited likely losses, but potentially unlimited profits.