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).

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Best Option Strategies – Strangle option techniques.

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