Long Straddle vs Long Strangle
Both buy volatility: a call and a put, profiting from a large move either way. The straddle buys both at the same at-the-money strike; the strangle buys them out of the money, apart. The straddle costs more and needs a smaller move; the strangle is cheaper and needs a bigger one.
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Side by side, live
| Long Straddle | Long Strangle | |
|---|---|---|
| Net Cost? | $3868.38 | $2924.95 |
| Max Profit? | Uncapped | Uncapped |
| Max Loss? | -$3868.38 | -$2924.95 |
| Breakeven(s)? | $82131.62, $89868.38 | $82075.05, $89924.95 |
| Prob. of Profit? | 41% | 40% |
| Delta? | -0.0174 | -0.0145 |
| Theta? | -180.8653 | -177.4452 |
| Vega? | 114.5456 | 111.9674 |
Both built on the same venue, asset and expiry, at execution prices with fees, exactly as each strategy's own page shows them; open either one to change strikes or width.
The difference
- Cost: at-the-money options are the most expensive, so the straddle's debit is larger, and so is its maximum loss if the price stays put.
- Breakevens: the straddle's are the strike plus and minus the total premium; the strangle's are the put strike minus it and the call strike plus it, further apart.
- Greeks: both are long vega and pay theta every day. The straddle has more gamma at the money, so it gains faster on the first part of a move.
When each one fits
The straddle suits an expected move that is large but not extreme, especially close to an event, when every point of the move counts. The strangle suits a bet on an outsized move for less money down, accepting that a moderate move may not be enough to reach either breakeven.
What to watch
Both are hurt by time and by falling implied volatility, even if the price moves. Compare the debit and the breakevens above with the move the market implies: if the implied volatility is already high, the move needed to profit is large for both.
Educational content, not investment advice. See the disclaimer.