Imagine watching a stock right before earnings. You know it’s going to swing, but you have no clue whether it will skyrocket or tumble. So, if you are thinking about when to use a long straddle strategy, that’s the time for you.
This strategy is built for uncertainty — when you expect movement but don’t want to pick a side.
How to Create a Long Straddle?
A Long Straddle is one of the most direct ways to trade volatility:
- Buy a Call option (gains if the stock rises).
- Buy a Put option (gains if the stock falls).
- Both at the same strike price and the same expiry date.
Your investment = the combined premiums.
Your maximum risk = only that premium.
Your potential profit = unlimited upside and significant downside if the stock plunges.
Right Time to Use Long Straddle Strategy
When it comes to trading, timing matters a lot. Long straddle strategy works best at the specific events in the market, like just before earning results, any big announcement etc.
Let’s learn in more detail how long straddle works during such a period:
1. Long Straddle Before Earnings
Earnings reports can move stocks dramatically. Some soar on strong profits, while others sink on bad surprises.
With a Long Straddle, you don’t care which way it goes you just need a large enough swing.
In October 2021, Infosys moved nearly 10% in a week after its quarterly results. A Long Straddle strategy around the earnings would have captured that sharp move, regardless of direction
2. Before Big News or Announcements
Company updates, leadership changes, lawsuits, or government rulings can create sudden price shocks.
If you expect a big move but can’t call the direction, a Long Straddle keeps you prepared for either outcome.
3. During Calm Markets With Expected Volatility
Options are cheaper when markets are quiet.
If you expect that calm period to end — for instance, before a policy decision — a straddle can be a smart play.
Even if the stock doesn’t move much, a jump in implied volatility (IV) alone can increase option prices and create profits.
4. When You Want Limited Risk
Unlike betting only on one direction, a Long Straddle has a clearly defined risk.
The most you can lose is the premiums you paid upfront.
This makes it attractive for traders who want open-ended profit potential while keeping losses capped.
Want to gain mastery in the long straddle strategy? Now is the time. Join our options trading mentorship and learn from market experts in LIVE sessions.
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Drawbacks of a Long Straddle
Here’s the flip side:
- If the stock barely moves, the trade just eats away at the premium you paid.
- With each passing day, the options lose value simply because time is running out.
That’s why straddles should be used selectively — ideally around events where volatility is almost certain.
Final Thoughts
The Long Straddle isn’t about guessing where the market will go — it’s about betting that it won’t sit still.
- Best used around earnings, news releases, or policy announcements.
- Avoid sideways markets where time decay eats away at value.
When used wisely, it’s one of the simplest and cleanest ways to trade volatility without having to pick a side.
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