Understand the position
Buy a $100 call for $6 and a $100 put for $5, same expiration and standard deliverable. Total cost is $11 per share, or $1,100. Maximum loss occurs at stock $100 at expiration. Break-evens are $89 and $111 before costs.
For a separate strangle illustration, buy a $95 put for $3 and a $105 call for $4. Cost is $7, maximum loss is $700 anywhere between the strikes at expiration, and break-evens are $88 and $112. The cheaper premium accompanies a wider zero-intrinsic region; it is not automatically a bargain.
Read the payoff and try a scenario
Long straddle: profit and loss at expiration
- Buy a $100 call for $6 and a $100 put for $5. Same expiration; $11 total debit.
- Expiration break-even stock prices: $89 and $111 before costs.
- The plot displays $70–$130 only. Move the control to $0 to examine a stock collapse; the right edge is not an upside bound.
Read the chart data
| Stock price at expiration · USD | Whole position P/L (Net P/L · USD per share) |
|---|---|
| 70 | 19 |
| 80 | 9 |
| 89 | 0 |
| 90 | -1 |
| 100 | -11 |
| 110 | -1 |
| 111 | 0 |
| 120 | 9 |
| 130 | 19 |
One contract per option leg; 100 shares where the strategy includes stock. Read the fixed position above before changing the price.
In the straddle, stock $108 creates $8 of call intrinsic and zero put intrinsic, leaving a $3 per-share loss after the $11 cost. At $120, net profit is $9 per share, or $900. A meaningful move can still be smaller than the premiums require.
Separate expiration economics from live prices
The diagram calculates net profit or loss at expiration with the specified position intact. Before that date, remaining time, implied volatility, rates, dividends and bid–ask spreads affect each leg’s market value. A break-even shown here is an expiration break-even, not the price at which an early closing trade must be profitable.
For an actual position, calculate net execution costs and contract quantities, and verify every leg’s expiration, underlying and deliverable. The examples use one standard 100-share contract per leg. Adjusted contracts can differ; an incomplete or mismatched hedge changes the risk.
Understand the tradeoffs and obligations
Long straddles typically have positive vega and negative theta. An event-related IV drop can hurt both options, and a move arriving after expiration cannot rescue expired contracts. Compare the implied uncertainty with a reasoned scenario, not merely a belief that earnings will be interesting.
Selling a straddle is a different strategy with a fundamentally different loss profile, including theoretically unlimited upside loss from its uncovered call. This lesson’s limited-premium maximum loss applies to the purchased combination, not the short version.
The stock rises 8% from $100 to $108. Is the $11 straddle profitable at expiration?
Show the explanation
No. Its intrinsic value is $8 against an $11 cost, so it loses $300 per standard straddle before costs.
Sources and editorial notes
Original explanations and hypothetical examples prepared with AI assistance. Primary reference check dates are listed below. Numerical examples are hypothetical unless explicitly identified otherwise.
- OCC / OIC: Long Straddle
Position construction and risk tradeoffs. All premiums, strikes, payoff graphics, practice questions and calculations are original fictional examples, not copied charts or performance results. Checked October 17, 2026.
- FINRA / OCC: Understanding Assignment
Exercise, assignment, after-hours risk and broker cutoff considerations. Strategy diagrams assume intact matching positions through settlement. Checked October 17, 2026.