The straddle option strategy involves buying both call and put options at the same strike and with the same exp. date. This can be quite expensive and you need a rather big move in either direction to get over the water. Letâs say that you instead of the one side of options, CALL or PUT, buy stock futures with the same exp. date and with the agreed price (strike) being just above or just under the strike of the options. Fx the "straddle" can contain long stock futures and PUT options. The futures being much cheaper than options would produce an overall cheaper position. It is cheaper so there are drawbacks, fx the stock futures is not as flexible as options as you are obligated to buy the stocks at the exp. day â if you do not sell the futures before exp. date´, and given that the strategy is all about big moves in the stock price I guess we can focus on delta. If the stock goes up you gain close to delta 1 on the futures and lose delta <= 1 on the PUT, if the stock goes down you lose close to delta 1 on the futures and delta <= 1 on the PUT. So this is not a perfect straddle but a more directional strategy where you bet more on one direction but still have downside protection. The direction you bet on is the one where you buy the futures. Any other drawbacks?
If you want to construct a straddle using the futures then you would need to buy 2 puts for every futures contract to have a straddle. Otherwise you end up with a synthetic call, in which case either just buy a call and save on commissions and slippage.
1) Options respond to price AND volatility movement. 2) Instead of a "traditional" straddle, you can get into "synthetic" straddles. Instead of buying a put option and call option, you could buy one futures contract and buy two put options and have the "same" position. You could also short one futures contract and buy two call options and again, have the "same" position. You have a total of three contracts instead of two contracts. 3) You can choose option strike prices with respect to the futures price. You can't "choose" futures prices with respect to the option strike prices. 4) The margin required for each position should be similar. 5) You can "bet" either way, long or short, with the futures because of the option leg of the trade.