A Long Straddle is a volatility strategy that involves simultaneously buying an ATM call and an ATM put on the same underlying asset at the same strike price and expiry date. The trader pays a combined premium for both options and profits if the underlying moves sufficiently in either direction — regardless of which way — to recoup the total premium paid. The maximum loss is limited to the total premium paid (if the underlying closes exactly at the strike at expiry), while the profit potential is theoretically unlimited to the upside and large to the downside. Long Straddles are popular ahead of high-uncertainty events in India — such as RBI policy meetings, election results, or major corporate earnings — where a large move is expected but direction is unclear.
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