Best Option Strategies – Strangle option techniques.
Best Option Strategies – Strangle option techniques.
Contents
- 0.1 Best Option Strategies – Strangle Option Technique
- 0.2 1. Long Strangle (Buying Strategy)
- 0.3 2. Short Strangle (Selling Strategy)
- 0.4 When to Use a Strangle?
- 0.5 Best Option Strategies – Strangle option techniques.
- 0.6 Optimal Options Investment Strategy – Final Report
- 0.7 26 proven options strategies
- 1 🎯 What Is a Strangle in Options Trading?
- 2 🟢 Types of Strangle Strategies
- 3 📊 Profit-Loss Summary:
- 4 🧠 When to Use a Long Strangle
- 5 📌 Long Straddle vs. Long Strangle
- 6 📉 Break-even Formula (Long Strangle)
- 7 🛠️ Tools You Can Use:
- 8 📦 Summary:
- 9 🎥 Want More?
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
Here’s a clear and practical guide to the Strangle Option Strategy, one of the most popular strategies used in options trading when you expect high volatility but are uncertain about the direction.
🎯 What Is a Strangle in Options Trading?
A Strangle is an options strategy where you buy:
-
1 Call Option at a higher strike price
-
1 Put Option at a lower strike price
Both options have the same expiration date, but different strike prices.
It’s similar to a Straddle, but usually cheaper because the options are out-of-the-money.
🟢 Types of Strangle Strategies
1. Long Strangle (Bullish on Volatility)
🔹 How It Works:
-
Buy 1 OTM Call (strike price above current price)
-
Buy 1 OTM Put (strike price below current price)
📈 Profit When:
-
The underlying stock/index moves sharply in either direction
📉 Loss When:
-
Price stays within the strike prices (between Call and Put)
💡 Example:
-
Stock is at ₹100
-
Buy Call at ₹105 (Premium ₹3)
-
Buy Put at ₹95 (Premium ₹3)
-
Total cost = ₹6
✅ Break-even on upside = ₹105 + ₹6 = ₹111
✅ Break-even on downside = ₹95 − ₹6 = ₹89
2. Short Strangle (Bearish on Volatility – High Risk)
🔹 How It Works:
-
Sell 1 OTM Call
-
Sell 1 OTM Put
You profit when price stays within the strike prices, and both options expire worthless.
⚠️ Risk is unlimited, profit is limited to premiums received.
📊 Profit-Loss Summary:
Strategy | Max Profit | Max Loss | Best Case |
---|---|---|---|
Long Strangle | Unlimited | Premium paid (limited) | Big move in either direction |
Short Strangle | Premium received (limited) | Unlimited | Price stays between strikes |
🧠 When to Use a Long Strangle
✅ Before major news, earnings, policy changes, or economic events
✅ When you expect volatility, but are uncertain of direction
✅ If Straddle is too expensive, Strangle is a cheaper alternative
📌 Long Straddle vs. Long Strangle
Feature | Long Straddle | Long Strangle |
---|---|---|
Strike Prices | Same (ATM) | Different (OTM) |
Premium Cost | Higher | Lower |
Break-even Range | Narrow | Wider |
Risk/Reward | Similar reward, higher risk (cost) | Similar reward, lower cost |
📉 Break-even Formula (Long Strangle)
Let’s say:
-
Call Strike = ₹105 (Premium ₹3)
-
Put Strike = ₹95 (Premium ₹3)
-
Total Cost = ₹6
✅ Upper Break-even = ₹105 + ₹6 = ₹111
✅ Lower Break-even = ₹95 − ₹6 = ₹89
Profit only if stock goes above ₹111 or below ₹89.
🛠️ Tools You Can Use:
-
Option Chain Analysis (NSE, Zerodha, Upstox)
-
Implied Volatility Charts
-
Payoff Calculators
-
OI (Open Interest) Analysis to predict range
📦 Summary:
Strategy | Use When | Risk | Reward |
---|---|---|---|
Long Strangle | Expect high volatility | Limited (Premium Paid) | Unlimited |
Short Strangle | Expect low volatility (risky) | Unlimited | Limited (Premium Earned) |
🎥 Want More?
Would you like:
-
📊 A chart or graph comparing Straddle vs Strangle?
-
🎥 A video script in Hindi or English?
-
🧾 PDF guide or cheat sheet with visuals?
Let me know and I’ll create it for you!