Definition
A strangle involves buying an out-of-the-money call and an out-of-the-money put with the same expiration but different strikes. It's cheaper than a straddle but requires larger price movement to profit. Used when expecting significant volatility with uncertain direction.
Formula
Example
Buy a $105 call and $95 put for $2 each. Profit if stock moves above $109 or below $91 by expiration.
FAQ
What is Strangle?
An options strategy buying OTM calls and puts at different strike prices.
How do you calculate Strangle?
A common formula for Strangle is: Call Breakeven = Call Strike + Total Premium | Put Breakeven = Put Strike - Total Premium
Why is Strangle important?
Strangle helps investors evaluate options and make more informed decisions.
Related Terms
Straddle
An options strategy buying both a call and put at the same strike price.
Volatility
A measure of how much a stock's price fluctuates over time.
Out Of The Money (OTM)
An option with no intrinsic value that would not be profitable if exercised.
Iron Condor
A neutral options strategy combining a bull put spread and bear call spread.