Browse Trading
Strangle Options Strategy: Buying Volatility With Two Different Strikes
Learn how a long strangle works, why it costs less than a straddle, and why the underlying still needs a large move to profit.
A long strangle combines an out-of-the-money call and an out-of-the-money put with the same expiration date but different strike prices.
Like a long straddle, it is a volatility trade. Unlike a straddle, it usually costs less because both options start out of the money.
Payoff at Expiration
The position loses the total premium if the underlying finishes between the two strikes. It becomes profitable only if the move is large enough beyond one side of the range.
Why Traders Choose It
Traders often choose a strangle when they expect a large move but want a cheaper entry cost than a straddle.
Main Tradeoff
The lower premium comes at a price: the underlying has to move farther before the trade reaches breakeven.