Market volatility exploded in the fourth quarter of 2008 as stocks tumbled. The CBOE Volatility index (VIX), which tracks prices of at-the-money (ATM) S&P 500 options, jumped to a record high of 89.53 before dropping to around 40 by the end of 2008.

Is there an options strategy that blends the benefits of a long straddle with long calls (or puts)? One answer is the backspread — a cheaper alternative that resembles a straddle with one of its "legs" removed.