when the event occurs bullish or bearish activity is commonly unleashed this causes the underlying asset to move quickly 
an options contract can last weeks or years depending on the expiration date 1long straddle riskthe risk inherent in the long straddle strategy is that the market may not react strongly enough to the anticipated event prices of put and call options also inflate in anticipation of the event this means the cost of attempting the strategy is much higher than solely betting on one direction sellers recognize that there is increased risk built into a scheduled news making event and raise prices if the event does not generate a strong move in either direction for the underlying security then the options purchased likely will expire worthless and create a loss calculating profitas the price of the underlying asset increases the potential profit is unlimited if the price of the underlying asset goes to zero the profit would be the strike price less the premiums paid for the options the maximum risk is the total cost to enter the position which is the price of the call option plus the price of the put option the maximum loss is the total for the net premium paid plus any trade commissions this loss occurs when the price of the underlying asset equals the strike price of the options at expiration the profit when the price of the underlying asset is increasing is the profit when the price of the underlying asset is decreasing is example of a long straddlea stock is priced at 50 per share a call option with a strike price of 50 is at 3 and the cost of a put option with the same strike is also 3 an investor enters into a straddle by purchasing one of each option the option sellers assume a 70 probability that the move in the stock will be 6 or less in either direction profit occurs at expiration if the stock is priced above 56 or below 44 regardless of how it was initially priced the maximum loss of 6 for one call and one put contract occurs only if the stock is priced precisely at 50 on the close of the expiration day the trader will experience less loss if the price is between 44 and 56 per share the trader will experience gain if the stock is higher than 56 or lower than 44 if for example the stock moves to 65 at expiration the position profit is 9 65 50 6 9 