A long straddle strategy is an options trading strategy used when a trader expects a significant price movement in a stock but is uncertain about the direction of that movement. It involves buying two options on the same underlying stock: a call option and a put option, both with the same strike price and the same expiration date. The strike price is usually chosen at or near the current market price of the stock, making it an at-the-money (ATM) straddle.

The main objective of a long straddle is to profit from high volatility. If the stock price moves sharply upward, the call option increases in value and can generate substantial profits. Conversely, if the stock price drops significantly, the put option gains value, offsetting the loss on the call option. As long as the price movement is large enough, the gains from one option can exceed the combined cost of both options.

The maximum loss in a long straddle is limited to the total premium paid for the call and put options. This loss occurs if the stock price remains close to the strike price until expiration, causing both options to expire worthless. The breakeven points are calculated by adding and subtracting the total premium from the strike price.

Time decay and changes in implied volatility play a crucial role in this strategy. While time decay negatively affects a long straddle, an increase in volatility before expiration can significantly improve its profitability.