Straddle is a market neutral strategy. it is a type of investment strategy undertaken by investors to make the profit from both increasing and decreasing price in the market. This option strategy accomplished by holding an equal number of puts and calls with the same strike price and expiration dates.
Two types of straddle positions Long straddle and Short straddle.
Long Straddle: A Long straddle is a way to profit, when investor expecting big price movement in the highly volatile market. This strategy consists of buying a call option and a put option with same strike price and expiration date.
Max Loss is limited to the premium paid to buy call and Put Option. Max gain is unlimited, the best is when the underlying make a big move in either direction.
Upside Break-even = Strike + Premium paid.
Downside Break-even = Strike – Premium paid.