How Does a “Long Volatility” Trade Manage the Impact of Theta?

A long volatility trade, such as buying a straddle or a strangle, is inherently net long options, meaning it has negative Theta. The strategy manages Theta by relying on a significant move in the underlying asset or an increase in implied volatility (Vega) to generate profits that outweigh the daily Theta decay.

The expectation is that the market's realized volatility will be higher than the implied volatility priced into the options.