The Mechanics of the short straddle showns that the same number of call and put options with the same strike price and expiration date are sold. The gain is limited to the initial premium received for the sale of both options. The potential loss is unlimited, since the stock price has no ceiling.
The direction of the stock does not matter to the straddle buyer as long as the movement up or down from the strike stays within the price received for the straddle. The maximum gain is the cost of the trade and occurs if the stock closes at the strike price. The straddle seller loses money if the underlying price exceeds a range around the strike price beyond the total premium received.
