A straddle is an options trading 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. This strategy is used when an investor expects significant price movement but is uncertain about the direction of that movement. By holding both options, the investor can profit if the asset's price rises significantly (through the call option) or falls significantly (through the put option). However, if the asset's price remains stable, the investor may incur losses due to the cost of purchasing the options, known as the premium.