A Straddle, used in options trading, is a strategy where the investor holds a position in both a call and put with the same strike price and expiration date for the same underlying asset.
Buying a Straddle offers a Trader the opportunity to profit off a move to the upside or downside. Max gain is theoretically unlimited and max loss is the price paid to enter the spread.
Here's a visual of a long Straddle:
Selling a Straddle offers a Trader the opportunity to profit when the underlying stays in a specified range. Max gain is the credit obtained for selling the spread. Max loss is theoretically unlimited.
Here's a visual of a short Straddle:
Related terms: Butterfly Trading Pattern, Strangle Option, Delta Option, Gamma Option, Theta Option, Vega Option