Long Straddle for Biotech Catalysts

A long straddle is a bet on a big move in either direction. You buy a call and a put at the same strike; your loss is capped at what you paid, and you profit only if the stock moves far enough past either breakeven.

You expect a large move but not the direction — typical around a binary event.

Pillar 1 · Illustrative setup

How this example is built

Buy a call and a put at the same strike and expiration. You pay for both, so the position starts at a loss and needs a move to pay off.

Illustrative inputs only — not live prices.

Open the on-device calculator →

A straddle is a long-volatility position; the on-device calculator covers vertical spreads, so the figures above are the straddle formulas for this illustrative setup.

Pillar 2 · When & why

Why this fits Biotech FDA Decisions

Traders use straddles ahead of binary events such as a biotech FDA decision, where the outcome can gap the stock sharply up or down. The catch is that options are priced for that uncertainty — implied volatility is high going in, so you pay up, and if the move is smaller than priced, or the decision slips, the position loses value.

Maximum loss is the full premium paid, realized if the stock sits near the strike at expiration. High implied volatility before the event means you're paying up; a muted reaction or a delay works against you quickly.

Pillar 3 · Risk / reward

The defined-risk math