How Can a “Straddle” Option Strategy Be Used to Profit from a PoS Transition Event?

A straddle involves simultaneously buying a call option and a put option with the same strike price and expiration date. The strategy is direction-neutral but long volatility.

A trader uses a straddle when they anticipate a significant price movement in the underlying asset, but are unsure of the direction. For a PoS transition, if the event causes a large price swing (up or down), the straddle profits; if the price remains stable, the trader loses the combined premiums paid.