Long Guts

An in-the-money put and an in-the-money call bought in the same expiration: the strikes are crossed, so both legs open carrying intrinsic value.

Also called Guts, In-the-money strangle, Guts strangle

Outlook

Volatility

Family

Directional

Level

Advanced

Legs

2 legs

Expirations

1 expiration

Opens for

Debit

Maximum profit

Unlimited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
A	Long	Put 105	1	Delta 70
B	Long	Call 97.5	1	Delta 70

What it is

A call bought at B below the underlying and a put bought at A above it — both in the money, in the same expiration. The strikes are crossed relative to a long strangle, where both legs are out of the money.

Because both legs are in the money, the debit already contains the distance between the strikes as intrinsic value. Only the part above that is time value, and only that part can be lost.

The payoff

At expiration

A U shape whose flat bottom sits between the two crossed strikes, above the zero line by the width the two in-the-money legs guarantee.

The shape is a long strangle’s, with the flat section between the strikes lifted:

• Between B and A — both legs are in the money and together are worth exactly the distance between the strikes. That amount is recovered whatever happens, so the maximum loss is the debit less that width, not the whole debit.
• Outside the strikes — one leg keeps gaining while the other’s intrinsic value is capped at the width.

Break-evens sit the same distance outside the strikes as a strangle’s do outside theirs, once the guaranteed width is accounted for.

How it behaves before expiration

Today, before expiration

Today's value is a smooth curve above the flat-bottomed shape, with the two corners rounded.

The curve behaves like a strangle’s, because the time value in the position is what moves — the intrinsic part does not decay. What is at risk to theta is the extrinsic value of two in-the-money options, which is smaller than the headline debit suggests.

The Greeks

Delta is near zero between the strikes: a deep call and a deep put largely offset.

Gamma is positive, concentrated where the legs cross out of the money.

Theta is negative, but on a smaller base than the debit implies — only the extrinsic portion decays.

Vega is positive and modest. In-the-money options carry less extrinsic value than at-the-money ones, so they respond less to a change in implied volatility.

Where it lives in the volatility environment

Practitioners treat long guts as economically equivalent to a long strangle at the mirrored strikes, and generally choose between them on execution rather than on exposure: the guts version ties up more capital and crosses wider markets, while the strangle version has more of its cost in time value.

Put-call parity is why the two are equivalent. A page that treats them as different exposures is describing the execution, not the position.

What can go wrong

• Capital is committed to intrinsic value. Most of the debit is the width between the strikes, returned only when the structure is closed.
• In-the-money markets are often wide, and the position crosses four of them.
• Early exercise does not apply to long legs, but exercising one to capture intrinsic value abandons whatever time value remains in it.
• Both legs must be closed. Half a guts position is a deep single option.
• It is easy to mistake for a bigger position than it is. The debit is large; the amount at risk is only its extrinsic part.

Building it in Option Panel

Open Build Strategy and pick Long Guts. The two strikes are selected independently, and the builder will accept the crossed arrangement that defines the structure — a call below the price and a put above it — rather than treating it as an error.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Long Strangle — the same exposure from out-of-the-money strikes, for a smaller debit.
• Long Straddle — the same view at a single strike.
• Short Guts — the other side.