Long Straddle vs Vol Crush

A long volatility strategy combining a bought at-the-money call and a bought at-the-money put at the same strike and expiry; profits when the underlying makes a large move in either direction; maximum loss is the total premium paid; most effective before high-impact catalysts.

The rapid compression of implied volatility that frequently occurs immediately after a highly anticipated event resolves; causes bought options to lose vega value even when the price move was favorable; the primary reason option buyers around events often lose money despite being correct on direction.