How Does a Trader Use a “Straddle” Strategy to Profit from Uncertainty in Moneyness?

A straddle involves simultaneously buying (long straddle) or selling (short straddle) a call and a put option on the same underlying asset, with the same strike price and expiration date. A long straddle profits from high volatility, regardless of direction, betting that the price will move far from the strike price.

A short straddle profits from low volatility, betting that the price will remain close to the strike price (ATM).