Options Made Simple: Straddles Explained
One of the most useful ways to gauge market expectations ahead of a big event — like Nvidia’s earnings tonight — is to look at the straddle.
But what exactly is a straddle, and what does it tell us?
What’s a Straddle?
A straddle is an options strategy where you buy a call and a put at the same strike price and expiration date.
A call option benefits if the stock goes up.
A put option benefits if the stock goes down.
When you buy both together, you’re essentially betting on big movement in either direction — you don’t care which way it goes, as long as it’s a big enough move.
Why Traders Look at It Before Earnings
Even if you’re not trading the straddle yourself, the price of a straddle reflects what the market is expecting.
The total cost of the call + put = the implied move.
Think of it as the “market’s best guess” for how much the stock might swing after earnings.
Example: Nvidia (NVDA) Tonight
Nvidia closed at $181.77 today.
Looking at the options market:
The at-the-money straddle (using the $182 strike expiring this week) costs about $11 in total.
That means the market is expecting a move of around ±$11 once earnings are out.
Put another way:
Traders are bracing for NVDA to trade anywhere between $170 and $192 over the next few days.
Why It Matters
If the earnings move is smaller than $11, straddle buyers lose and straddle sellers win.
If the earnings move is bigger than $11, straddle buyers win and sellers lose.
This “implied move” becomes an anchor point for positioning:
Bullish traders ask: “Will NVDA beat expectations enough to clear $192?”
Bearish traders ask: “Could the miss be bad enough to take it below $170?”
Neutral traders ask: “Is the market overpricing the risk? Maybe it won’t move that much.”
The Takeaway
You don’t need to trade options to learn from them. The straddle gives a real-time measure of crowd expectations — a way of peeking into the market’s collective mind before a big event.
Tonight, all eyes are on Nvidia. The options market says: “We’re braced for about an $11 swing.”
Whether it’s fireworks to the upside 🚀 or a sharp reversal 🔻, the straddle tells you what the market is ready for.
⚠️ This is educational content only and not investment advice. Options involve risk and may not be suitable for all investors.