Chapter 06 · Section 6.1

Strangles in a Stable Market Outlook

1. 1Trading→
2. 2Profit Potential→
3. 3Loss Potential→
4. 4Breakeven Point→
5. 5Strangle vs Straddle→

A strangle is similar to a straddle, except that the call and the put have different exercise prices. Usually, both the call and the put are out-of-the-money.

To "buy a strangle" is to purchase a call and a put with the same expiration date, but different exercise prices. Usually the call strike price is higher than the put strike price.

To "sell a strangle" is to write a call and a put with the same expiration date, but different exercise prices.