Strangle

Low cost, very high profits if the price rises or falls significantly

The Strangle is a strategy that helps you to make a bet on a volatility rise: that the price of an asset will soon rise or fall significantly in either direction. The Strangle consists of an out-of-the-money call option and an out-of-the-money put option with the same strike price and the same expiration.

Instead of being bullish or bearish about the future price, you can have the following reasoning when buying it: “I don’t care what the price will be, but if it changes significantly in either direction during the period of holding the Strangle, I win big.”

The Strangle is much cheaper than the Straddle (which consists of two at-the-money options). This means that you will pay much less when buying Strangles (two out-of-the-money options) and have a higher profits potential.

The Strangle has a limited cost and unlimited potential profit.

Buying one Strangle is equal to buying two OTM options - one OTM call and one OTM put.