Core Viewpoint - The article introduces the "Long Straddle" strategy, which is designed for investors who anticipate significant stock price volatility but are uncertain about the direction of the movement [1][6]. Summary by Sections Strategy Definition - The Long Straddle is a strategy that involves buying both a call option and a put option with the same strike price and expiration date, allowing investors to profit from large price movements in either direction [1][3]. Profit and Loss Calculation - The two breakeven points for the strategy are defined as: - Lower breakeven point = Strike price (X) - (Call premium (P1) + Put premium (P2)) - Upper breakeven point = Strike price (X) + (Call premium (P1) + Put premium (P2)) [3]. - The maximum profit potential is theoretically unlimited, while the maximum loss is limited to the total premium paid for the options [3][8]. Practical Application - The article provides a hypothetical example where a stock is priced at $280.07, and the investor expects significant volatility due to an upcoming earnings report [6][12]. - Different investor profiles are illustrated, showing how they might choose between holding the stock, buying a call option, or a put option, with varying levels of risk and potential returns [7][10][14]. Strategy Characteristics - The Long Straddle is characterized as a neutral strategy suitable for situations where significant price movement is expected, but the direction is uncertain [8]. - Initial costs are relatively high due to the purchase of two options, and substantial price movement is necessary to cover the cost of both premiums [8][18]. Recommendations for New Investors - It is advised to use at-the-money (ATM) options for constructing the strategy, as they provide a delta-neutral position [18]. - Investors should calculate the breakeven points to assess whether the expected price movement is sufficient to make the strategy profitable [18]. - The strategy is best employed when implied volatility is low, as this makes options cheaper and allows for greater potential gains when volatility increases [18][19].