Option Strategies Details

Buy 1 ATM Call and Buy 1 ATM Put
1. Speculate on increasing volatility and a large increase or large decrease in price
Up
Up a lot or Down a lot
Bought Strike Price plus the Premium (debit) paid or minus the Premium (debit) paid
Cost of the Straddle
same as Max Contract Loss
Long Straddle
You buy (long) an ATM Call and buy (long) an ATM Put
Description
A trader who wants to speculate on an increase in volatility and a large increase or large decrease in price can buy a Straddle. The trader pays a debit for the whole position, called a premium.
Suppose stock XYZ is trading at $165. You forecast an increase in XYZ volatility and a large increase or a large decrease in XYZ price.
You buy a $165 Straddle (buying the $165 Put and buying the $165 Call) for a $11.40 debit to express this view. You have two breakeven prices: either $165 (strike price of the bought Call and bought Put) - $11.40 (premium paid) = $153.60 or $165 (strike price of the bought Call and bought Put) + $11.40 (premium paid) = $166.40, but since the time component of your trade plan may not extend all the way to expiration you should be prepared to buy to close at a variety of XYZ prices as the market value of your $165 Straddle changes.