what is an example of a straddle 
consider a trader who expects a company s shares to experience sharp price fluctuations following an interest rate announcement on jan 15 the stock s price is currently 100 the investor creates a straddle by purchasing both a 5 put option and a 5 call option at a 100 strike price that expires on jan 30 the net option premium for this straddle is 10 the trader would realize a profit if the price of the underlying security was above 110 at the time of expiration which is the strike price plus the net option premium or below 90 which is the strike price minus the net option premium can you lose money on a straddle yes a trader faces the risk of losing money if an equity s price doesn t move larger than the comparative premiums paid on the options straddle strategies are often entered into in consideration of more volatile investments for this reason the bottom linean investor has entered into a straddle position if they buy both a call and a put for the same strike price on the same expiration date this strategy allows an investor to profit from large price changes regardless of the direction of the change an investor will likely lose money regarding the premiums paid on the worthless options should the underlying security s price remain fairly stable but an investor can reap a profit on large increases or decreases in the equity price disclosure investopedia does not provide investment advice investors should consider their risk tolerance and investment objectives before making investment decisions 