Straddle and strangle

A long straddle combines a call and a put with the same strike and expiry, usually at the money. A long strangle buys an out-of-the-money call and an out-of-the-money put, which is cheaper but needs a bigger move to pay off. In both cases the buyer does not care about direction, only about the size of the move relative to the premiums paid.

Crypto traders use them before events that can jolt prices, such as ETF decisions, US inflation data, network upgrades or token unlocks. The opposite trade, selling a straddle or strangle, collects premium and profits if the market stays calm, which is a common way to be short volatility.

Long straddles suffer from time decay every day the market stays flat, and implied volatility often falls right after the anticipated event, crushing option prices even if spot moves. Short straddles and strangles carry theoretically unlimited risk on the call side and can be devastating in a sudden crypto crash or squeeze.