Long Straddle Profit Loss Graph The long straddle position is when an investor purchases the same number of call and put options at the same strike price with the same expiration date. In this way, an investor can take advantage of any sudden movement in the stock price regardless of direction. This long straddle option strategy might be employed before earnings or FDA approval notice is about to be in the news. The investor expects the stock price to react to the news, but depending on the news event, the direction of the move is unknown. Since the investor is buying options there is a net debit to enter the trade. The maximum risk in the position is equal to the net debit. By purchasing both a call and a put, there are both upper and lower break even points. A profit is realized on the position if the stock rises above the upper break even (possible unlimited profit potential) or below the lower break even (limited from the lower break even point to zero). Some investors also use a straddle play to take advantage of deflated option prices and low volatility. If both options are purchased at a discount, the investor assumes that volatility will rise to normal levels and theoretically, the price of both options may increase regardless of the stock price movement.
 Buy calls at a set strike price and expiration date. Buy the same number of puts at the same strike price and expiration date. The net investment is the net debit (total premiums paid). The maximum risk is equal to the net debit (total premiums paid). The position has both an upper break even and a lower break even. Long Straddle Option Strategy Profit is realized if the stock goes above the upper break even or below the lower break even.
Upper Break Even = Strike Price + Net Debit
Lower Break Even = Strike Price - Net Debit
Probability Sum = (Prob. Above Upper Break Even) + (Prob. Below Lower Break Even)
Max Risk = Net Debit = Cost Of Position
Where...
Net Debit = Premium of Bought Call + Premium of Bought Put
 Example: Stock XYZ at \$45.61 per share. Buy the FEB 45 Call for \$2.10 Buy the FEB 45 Put for \$1.60 Max. Risk = Net Debit = \$2.10 + \$1.60 = \$3.70 Upper Break Even= Strike + Net Debit = \$45.00 + \$3.70 = \$48.70 Lower Break Even= Strike - Net Debit = \$45.00 - \$3.70 = \$41.30