Straddles & Strangles

You don't know if BTC is going to 120k or 70k. You just know it's not staying at 95k. Straddles and strangles let you trade that conviction.

These are volatility trades. You're not picking a direction; you're picking a size. Buy a straddle if you think the market is underpricing the next move. Sell one if you think it's overpricing it. The implied move is baked into the price. Your job is to decide if the market is right.

Long Vol vs Short Vol

Long Volatility

Buy straddle or strangle

You think the underlying will move MORE than the market expects
You pay premium upfront (defined risk)
Gamma is your edge -- moves accelerate your P&L
Theta is the price of admission -- time erodes your position daily
Vega is your friend -- rising IV is a tailwind before expiry

Profitable when realized vol exceeds implied vol.

Short Volatility

Sell straddle or strangle

You think the underlying will move LESS than the market expects
You collect premium upfront (unlimited risk)
Gamma is the risk -- moves accelerate your losses
Theta is the income -- time decay earns you money every day
Vega is the enemy -- rising IV inflates what you owe

Profitable when realized vol is below implied vol.

💡

On average, implied vol exceeds realized vol. This means long straddles have a structural headwind and short straddles have a structural tailwind. But averages include the tail events that blow up the short sellers.

The Implied Move

This is the single most important number on any vol trade. Calculate it before you do anything else.

Implied move = straddle price / spot price.

A 4,200 straddle on 95,000 BTC = 4.4% implied move. BTC needs to go above 99,200 or below 90,800 for the long straddle buyer to profit at expiry.

The implied move is 6%. If you think the real move is 10%, buy the straddle. If you think it's 3%, sell it. That's the entire trade.

Straddle vs Strangle

Both trade the same thesis. The difference is where you place your strikes.

Straddle

Strangle

Strikes

Both ATM (same strike)

OTM call + OTM put (different strikes)

Premium

Higher

Lower

Breakeven distance

Narrower

Wider

Max loss zone

Single point (the strike)

Flat region between strikes

Gamma at entry

Maximum

Lower

Theta at entry

Maximum (worst for long)

Lower (less bleed)

Straddles cost more but break even faster. Strangles cost less but demand a bigger move. Neither is inherently better. It's a cost vs. breakeven trade-off.