Straddles & strangles
Pure volatility bets, profit from a big move in either direction.
Straddles and strangles are volatility trades: they buy both a call and a put, so direction does not matter. A straddle uses the same at-the-money strike for both; a strangle uses out-of-the-money strikes, which costs less but needs a bigger move to pay off.
The straddle
A long straddle buys the ATM call and the ATM put, same strike and expiry. Direction does not matter, only magnitude. You profit if the stock makes a big move either way, enough to cover both premiums.
The strangle
A strangle is the cheaper cousin: an OTM call and an OTM put instead of ATM. Lower cost, wider breakevens, it needs an even bigger move, but risks less premium.
When to use them
Best used into events, earnings, FOMC, CPI, when you believe the real move will exceed the expected move the market has priced in. If you are right about the magnitude, direction takes care of itself.