A straddle is a neutral options strategy that involves simultaneously buying (long position) both a put option (leg one) and a call option (leg two) for the underlying security with the same strike price and the same expiration date.

A trader will profit from a long straddle when the price of the security rises or falls from the strike price by an amount more than the total cost of the premium paid. The profit potential is virtually unlimited on the call leg as long as the price of the underlying security moves very sharply. The profit on the put leg is capped at the difference between the strike price and zero less the premium paid.