Straddle (Long)

Psychology:

A straddle is basically betting on an underlying asset going either up or down quickly. It’s a strategy that covers any turn in the market. The long straddle is considered a good strategy when you’ve calculated a low implied volatility or your research indicates that the market will make a significant shift around a certain time in the near future. An example of when a long straddle would be appropriate is when a company has announced that it will announce its earnings within a couple of months. In this scenario, it’s possible for the information to affect an underlying asset’s share price.

Risk / Reward:

Maximum Loss: Limited to the total amount of premiums paid for both options.

Maximum Gain: Unlimited.