Straddle
A call and a put on the same strike — a bet on how much the market moves, not which way.
Definition
Straddle is an options strategy that combines a call and a put at the same strike price and same expiry. A long straddle buys both legs and profits when the underlying makes a big move in either direction; a short straddle sells both legs and profits when the underlying stays put. Traders usually centre the strike at-the-money so the position has no directional bias at entry.
Why it matters
A straddle is the cleanest way to express a view on volatility rather than direction. Long straddles are popular ahead of known events — earnings, RBI policy, the Union Budget — where a sharp move is expected but the direction is unclear. Short straddles harvest premium when implied volatility looks rich and the market is expected to stay range-bound, but they carry large, theoretically unlimited risk if the move is bigger than priced in.
Example
Suppose NIFTY trades at 24,000 before a big event. You buy the 24,000 call and the 24,000 put, paying a combined premium of, say, 300 points (illustrative). You break even only if NIFTY closes above 24,300 or below 23,700 by expiry. Inside that band the long straddle loses money; beyond it, gains grow as the move extends.
See it live
Pick an at-the-money strike on TradePulse's live option chain to read both call and put premiums for a straddle.