Looking for a way to have your cake and eat it too? Well, the phrase "there's no free lunch on Wall Street" is basically true, but there may be a way to get a cheaper one.

Would you believe you can be both bullish and bearish at the same time, yet still make money? Its true. Options can give you chance to maximize a gain in one direction, and minimize the loss in the other, and you don't even necessarily have to guess right. The strategy is called a straddle, and it's surprisingly easy to do. As the name sounds, you "straddle" a particular stock or index price level by buying puts as well as calls with the same strike price. Ideally, the strike price of the calls and puts will be very close to the current price of the underlying stock or index.

Yes, you'll lose on one side of the trade. However, that loss should be more than offset by the gain you reap on the other side of the trade, provided you actually get enough movement. And therein lies the pitfall of the strategy -- if the stock or index goes nowhere (or not far enough fast enough), then the value of both the put and the call shrinks as time passes until both become worthless.

Let's look at an example. Say you believe The KBW Regional Bank Index (KRE) is getting ready to make a big, bullish breakout, or a major, bearish breakdown. You think it will be big either way, but you just don't know which way it will be.

With the Regional Banking Index currently priced at $30.30, the closest option strike is $30.00. We can buy the November $30.00 call for $1.55 (or $155 per contract). We can buy the November 30.00 put for $1.25 (or $125 per contract). To do both, our initial cash outlay is $280 per set of contracts. The sum value of both contracts now has to exceed $280 at some point in time in order for us to make money.

And what will it take for that to happen? It really depends on when it happens, but generally speaking, The Regional Banking Index would have to get above $33.07 to make $3.00 off the calls, which is the price increase we'd need to offset the loss on the puts. Or, if Regional Bank shares fell under $26.89, then the calls would be worth practically nothing, which means we would need the gain on our puts to be at least $1.55, to offset the loss on the calls. Most any price above $33.07 or below $26.89 would mean we'd start making some real money. Why? The losing side's value can't shrink to less than zero, but the winning side has unlimited potential. Take a look at the profit/loss graph below, which forms a 'V'-this represents the profitability from the underlying stock moving in either direction.



If you're new to the idea of straddles, go ahead and read it again if it didn't sink in. Better yet, I encourage doing the math yourself, and paper trade a few straddles. They're actually pretty easy once you know what you're trying to accomplish.

Tips and quirks: It can't be stressed enough; you have to get a lot of movement to make this strategy work, which can be more difficult than it sounds. Remember, the underlying stock or index has to move enough to offset the loss on one of the options before you start to clear any money from the winning trade. Also, you may need a little time to maximize your gain here, so front-month options may not be ideal, but buy yourself a little time.

Price Headley is the founder and chief analyst of BigTrends.com.