An option trader will acquire a long straddle if the trader expects a share price to become much more volatile than the market expects.

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A long straddle involves buying both a call option and a put option at the same strike price and expiration date. This strategy profits if the underlying security experiences a large price movement, either up or down, beyond the cost of the premiums paid for the options. Therefore, an option trader may use a long straddle if they have a strong belief that a particular stock or index will experience more volatility than the market is currently anticipating.

An Option Trader Will Acquire a Long Straddle If the Trader