An option combination that longs a call and a put simultaneously in order for an investor to protect himself/ herself from high volatility. This strategy makes sense when uncertainty about market direction is high (that is, which direction prices follow doesn’t matter, all what we are sure about here is “absolute movement”). More specifically, this popular options strategy involves buying a call and put with the same exercise price and expiration date. If there is a sufficiently large move, upward or downward, the position would pay off handsomely.
The straddle is also known as a bottom vertical combination, bottom straddle or straddle purchase.
The reverse position is a top straddle, straddle write or top vertical combination.
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