Option Straddle

An option straddle is a neutral strategy that involves buying both a call option and a put option with the same strike price and expiration date. This strategy is profitable if the underlying asset makes a significant move in either direction, regardless of whether the price goes up or down.

The primary risk is that the underlying asset remains stagnant, causing both options to lose value as they approach expiration. Straddles are most effective when a trader expects high volatility but is unsure of the directional trend.

In the context of crypto derivatives, straddles are frequently used ahead of major protocol upgrades or regulatory announcements. The total cost of the trade represents the maximum potential loss if the asset price does not move beyond the break-even points.