A straddle and a strangle are both volatility trades, not directional trades. In each case, a call and a put are bought on the same stock and same expiration date because the expectation is not about whether the price goes up or down, but whether it moves enough. A straddle uses the same strike price for both the call and the put, making it more expensive but allowing profitability with a smaller move away from the current stock price. A strangle uses different strikes — a higher call and a lower put — which reduces the upfront cost but requires a larger move to reach profitability. Both strategies are typically used when a significant price move is expected, such as around earnings or major news, but the direction of that move is uncertain.
The calculator is designed to answer one simple question: how far does the stock actually need to move before this trade makes money. Using a stock price of 46, the example shows a call option at 47 costing 1.35 and a put option at 45 costing 1.49, for a total cost of 2.84. That total cost is the maximum amount that can be lost, and it also defines the hurdle the stock must clear. When those numbers are entered, the calculator shows that the stock must move about ±3.84 points from 46 to reach profitability, meaning the price would need to rise to roughly 49.84 or fall to about 42.16 by expiration. The dollar-by-dollar table then shows what happens to the position at each one-dollar change in the stock price, making it easy to see why small moves don’t help much and why a meaningful move is required before the trade starts working. This type of trade does not make sense when the stock is unlikely to move much or when the cost of the options is already high, because even being “right” on volatility may not be enough to overcome the price paid. Try your own numbers and see what the trade really demands.
Straddle and Strangle Calculator
| Stock Price | Call Value | Put Value | Net P/L |
|---|---|---|---|
| $36 | $0.00 | $9.00 | $6.16 |
| $37 | $0.00 | $8.00 | $5.16 |
| $38 | $0.00 | $7.00 | $4.16 |
| $39 | $0.00 | $6.00 | $3.16 |
| $40 | $0.00 | $5.00 | $2.16 |
| $41 | $0.00 | $4.00 | $1.16 |
| $42 | $0.00 | $3.00 | $0.16 |
| $43 | $0.00 | $2.00 | $-0.84 |
| $44 | $0.00 | $1.00 | $-1.84 |
| $45 | $0.00 | $0.00 | $-2.84 |
| $46 | $0.00 | $0.00 | $-2.84 |
| $47 | $0.00 | $0.00 | $-2.84 |
| $48 | $1.00 | $0.00 | $-1.84 |
| $49 | $2.00 | $0.00 | $-0.84 |
| $50 | $3.00 | $0.00 | $0.16 |
| $51 | $4.00 | $0.00 | $1.16 |
| $52 | $5.00 | $0.00 | $2.16 |
| $53 | $6.00 | $0.00 | $3.16 |
| $54 | $7.00 | $0.00 | $4.16 |
| $55 | $8.00 | $0.00 | $5.16 |
| $56 | $9.00 | $0.00 | $6.16 |
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The information on this website is provided for educational and informational purposes onlyand does not constitute financial, investment, or trading advice. Options trading involves substantial risk and is not suitable for all investors. Past performance is not indicative of future results.