Best Option Strategies – Strangle option techniques.

Best Option Strategies – Strangle option techniques.



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Best Option Strategies – Strangle Option Technique

A Strangle is an options trading strategy used to profit from large price movements in a stock or index, regardless of direction. It involves buying or selling both a call and a put option with the same expiration date but different strike prices.

1. Long Strangle (Buying Strategy)

Best for: High volatility expectations (before earnings, news events, etc.)
How it works:

  • Buy Out-of-the-Money (OTM) Call (higher strike price)

  • Buy Out-of-the-Money (OTM) Put (lower strike price)

Profit: If the stock makes a big move in either direction
Loss: If the stock stays within a small range (loss limited to premium paid)

Example:

  • Stock Price: $100

  • Buy Call (Strike: $105, Premium: $2)

  • Buy Put (Strike: $95, Premium: $2)

  • Total Cost (Premium Paid): $4

  • Profit if the stock moves above $109 or below $91 before expiry.

2. Short Strangle (Selling Strategy)

Best for: Low volatility expectations (range-bound stocks)
How it works:

  • Sell OTM Call

  • Sell OTM Put

Profit: If the stock remains within a range (you keep the premium)
Loss: If the stock makes a large move (unlimited risk)

Example:

  • Stock Price: $100

  • Sell Call (Strike: $110, Premium: $3)

  • Sell Put (Strike: $90, Premium: $3)

  • Total Credit (Premium Collected): $6

  • Max Profit: $6 if the stock stays between $90 and $110.

  • Unlimited loss if the stock moves too far in either direction.

 When to Use a Strangle?

  • Long Strangle → Expecting big movement (earnings, news, events).

  • Short Strangle → Expecting little movement (sideways market).

Would you like a live example or more advanced strategies?

Best Option Strategies – Strangle option techniques.

Optimal Options Investment Strategy – Final Report

26 proven options strategies



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