The purchase or sale of an equal number of puts and calls with the same strike price and term to maturity. Long straddles are constructed by purchasing a call and a put with the same strike price and term to maturity at the same time, which will result in gains if there is significant market movement and losses if volatility is low. Short straddles are constructed by selling a call and a put with the same strike price and term to maturity at the same time, which will result in losses if there is significant market movement and gains if volatility is low.