Long Strangle
A long strangle buys an out-of-the-money call and an out-of-the-money put at different strikes with the same expiry — a cheaper alternative to the straddle that still profits from a large directional move.
- Max profit
- Unbounded
- Max loss
- -400
- Breakeven(s)
- 86.0, 114.0
When to use
Use when you expect a large move but want to spend less premium than a straddle. The wider strikes make it cheaper upfront but require a bigger underlying move to reach profitability.
Risk profile
Maximum loss is the total debit paid (lower than a comparable straddle). There is no profit in the range between the two strikes. Profit grows the further the underlying moves beyond either breakeven.
FAQ
How do I calculate the breakevens for a long strangle?
Upper breakeven equals the call strike plus the total debit paid. Lower breakeven equals the put strike minus the total debit. For a $95 put at $2 and $105 call at $2, breakevens are $91 and $109.
When does a strangle beat a straddle?
A strangle outperforms if the underlying makes a very large move — the cheaper initial cost means more net profit on extreme moves. A straddle is better for moderate moves because it has a narrower profit gap between the strikes.
Is a long strangle affected by time decay?
Yes — both legs are long options, so the position has negative theta. Time decay accelerates as expiration approaches, which works against you if the underlying stays range-bound.