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Best Option Strategies – Strangle option techniques.

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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:

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:

2. Short Strangle (Selling Strategy)

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

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

Example:

 When to Use a Strangle?

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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:

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:

Profit When:

Loss When:

Example:

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:

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:

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:

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)

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Best Option Strategies – Strangle option techniques.