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Long straddle: a big move is not enough; it also has to come fast

See how fast time eats a straddle at different prices, and on which day the profit from a 5% move turns into a loss.

Long straddle · Buy 1 100 Call / Buy 1 100 Put · 30 days

Open in the full Lab
TodayDay 30
Day 1515 days to expiration · 15d left
IV shift
P&L−$200

Time-slice chart

5 scenarios from Today to Day 30. If the price stays at 90, P&L goes from +$376 to +$315. If the price stays at 95, P&L goes from +$84 to −$185. If the price stays at 100, P&L goes from $0 to −$685. If the price stays at 105, P&L goes from +$141 to −$185. If the price stays at 110, P&L goes from +$460 to +$315. Cursor on Day 15.

Left and right arrows change the day; up and down switch the scenario price.

Price-slice chart

P&L across prices $74.00 to $126.00. At expiration: breakeven $93.15 and $106.85, max profit Unlimited, max loss −$685. On Day 15 at $100.00: −$200.

Left and right arrows move the price.

P&L heatmap

LossProfit

Time-effect map

Time hurtsTime helps

At $100.00 · Day 15

Upside left to expiration

Unlimited Profit

Downside left to expiration

−$485

From −$200 now · If the price stays at $100.00: −$485

Position at expiration

Max profit

Unlimited Profit

If the price keeps rising

Max loss

−$685

At $100.00

Breakeven

93.15 / 106.85

At expirationDay 15: 93.97 / 105.43

All figures are Black-Scholes model estimates, not market quotes or guarantees.

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)
Underlying priceDay 0Day 7.5Day 15Day 22.5Day 27Day 30
90+$376+$344+$319+$308+$311+$315
95+$84+$13−$64−$144−$182−$185
100$0−$92−$200−$342−$468−$685
105+$141+$61−$27−$123−$174−$185
110+$460+$408+$361+$327+$318+$315

Structure and P&L at expiration: two breakevens

A long straddle has two legs: you buy a call and a put, both with a strike of 100 and both expiring in 30 days. Every number on this page assumes a current price of $100, implied volatility (IV) of 30%, a 4% risk-free rate, no dividends, 30 days to expiration, and one contract per leg.

The call costs $3.59 a share and the put $3.26, for a net debit of $685.40.

  • Max loss: $685.40, if the price finishes exactly at $100.
  • Breakevens: $93.15 and $106.85, the strike minus and plus the total premium per share.
  • Max profit: unlimited on the upside; $9,314.60 on the downside if the stock goes to zero.

Both premiums are paid up front, and no margin is involved. At entry, Delta is +6.47, close to neutral, Gamma is +9.246, and the instantaneous Theta is −$11.40 a day: two options decaying at once.

Time profile: prices from $90 to $110

  • At $100, the price unchanged, time takes everything: −$92 by day 7.5, −$200 by day 15, −$685 at expiration. The second half of the month costs $485 of it.
  • At $95 and $105, a 5% move, the position starts with a profit (+$84 and +$141) and ends at −$185.
  • At $90 and $110, beyond the breakevens, the position stays profitable: +$376 falls to +$315, and +$460 falls to +$315.

The profit time takes back: the day it turns negative

A move that shows a profit on day 0 doesn’t keep it if the price then sits still. At $105, the P&L falls from +$141 to +$61 by day 7.5 and turns negative on day 12.8. At $95 it turns negative even sooner, on day 8.8.

Beyond the breakevens, time matters less, because most of the value is intrinsic. At $110, time takes $145 over 30 days, from +$460 to +$315.

IV: a variable that moves faster than time (entry Vega +$22.80 a point)

The straddle’s entry Vega is +$22.80 per point of IV. If IV falls by 5 percentage points (pp) right after you buy, the position shows −$114 on day 0 with the price unchanged. That is about 10 days of time decay at the day-0 rate, arriving at once; a 5-point rise shows +$114.

IV keeps mattering after entry. On day 15, a −5 pp shift takes the $100 row from −$200 to −$281.

The model effect on the deep in-the-money put side

Far below the strike, the next-day change turns positive in the model: below $83.04 on day 0, $86.98 on day 15, and $96.43 with 1 day left. This comes from the long put, not from the straddle as a whole. A European put deep in the money is valued below its intrinsic value and climbs toward it as expiration approaches.

US stock options are American-style, and the holder of an in-the-money put can exercise at any time for the intrinsic value. So this is a feature of the model, not a gain to plan around. The Lab marks the zone with an early exercise notice.

Try it in the Lab: three experiments

  1. Drag the day slider to day 13 (the link opens there, with the cursor at $105) and watch the $105 line cross zero: it started at +$141 and is now about −$2.

    Open in the Lab

  2. Apply an IV shift of −5 pp. With the cursor on day 0, the position shows −$114 at $100 before any time passes.

    Open in the Lab

  3. Open the time-effect map and find the deepest band of negative values: it sits around the strike and gets darker in the final days.

    Open in the Lab

Three common misconceptions

  • MisconceptionAny big move up or down makes money.

    What the numbers showA rise to $105 on day 0 shows +$141, but if the price stays there, the position turns negative on day 12.8 and ends at −$185.

  • MisconceptionA straddle doesn’t care about direction, so you only need to wait.

    What the numbers showWaiting is the cost: at $100, instantaneous Theta grows from −$11.40 a day on day 0 to −$62.64 a day with 1 day left.

  • MisconceptionIV only affects the entry cost and doesn’t matter after you open.

    What the numbers showAt entry, each point of IV moves the P&L by about $22.80, so a 5-point drop shows −$114 on day 0, about 10 days of time decay. It still matters later: on day 15 the same drop takes the $100 line from −$200 to −$281.