Long Strangle
Description
Buying an out-of-the-money call and an out-of-the-money put, a cheaper version of the long straddle that needs a bigger move to pay off.
Setup
- Buy one out-of-the-money call.
- Buy one out-of-the-money put, same expiry.
Context
Used ahead of an expected large move when the trader wants to lower the cost of a long straddle and is willing to accept a wider breakeven range.
Risk Profile
Maximum loss is the combined premium paid, realized if the underlying finishes between the two strikes. Gain is unlimited on a large enough move in either direction.
Pros
- Cheaper than a long straddle.
- Profits from a big move regardless of direction.
- Defined, capped maximum loss.
Cons
- Wider breakeven range than a straddle, since both legs start out of the money.
- Loses value quickly if the underlying stays between the strikes.
Effect of Time
Time decay works against the position every day the underlying stays inside the two strikes.
Effect of Volatility
A rise in implied volatility benefits both legs and can produce a profit even without the underlying moving.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Long | Call | 1 | $85000.0000 | 24 Sep 2026 | $71.7670 | $84.4318 | $8.9709 |
| Long | Put | 1 | $84000.0000 | 24 Sep 2026 | $97.0965 | $109.7613 | $12.1371 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | $1000.0000 | $831.1364 | +492.2% |
| $83831.1364 breakeven | $168.8636 | $0.0000 | +0.0% |
| $84000.0000 | $0.0000 | -$168.8636 | -100.0% |
| $84431.7800 current | $0.0000 | -$168.8636 | -100.0% |
| $85000.0000 | $0.0000 | -$168.8636 | -100.0% |
| $85168.8636 breakeven | $168.8636 | $0.0000 | +0.0% |
| $86000.0000 | $1000.0000 | $831.1364 | +492.2% |