Assume you believe Tesla's earnings will have a significant impact on its stock price, and you buy call and put options with the same strike price. Both are valid for 24 hours following the earnings announcement.

If Tesla shares to rise significantly above the strike price, you can exercise your call option and buy the shares at a lower strike price. If Tesla shares fall significantly below the strike price, you have the put option and can profitably sell these shares at a higher strike price. If the total move-in Tesla shares is greater than the amount paid for the call and put option at expiry, an overall profit is realized.

However, if Tesla's earnings have little impact on its stock price and the move does not exceed the premium paid, you will lose money on the long straddle when it expires. In this case, a short straddle would have allowed you to collect two premiums with minimal payback to the option holder, resulting in a profit at option expiration.

A straddle in trading is an options strategy that involves buying both a call option and a put option for the same underlying asset, with the same strike price and expiration date. Traders use this strategy when they anticipate significant price movement in the asset but are uncertain about the direction.

For example, suppose a stock is currently trading at $100. A trader might buy a $100 call option and a $100 put option. If the stock price rises significantly above $100, the call option gains value. If it falls below $100, the put option gains value. The goal is for the profit from one of the options to offset the cost of both, leading to a net gain regardless of the price direction.