Long Strangle

An out-of-the-money put and an out-of-the-money call bought in the same expiration: cheaper than a straddle, and it needs a larger move before it pays.

Also called Strangle, Bought strangle

Outlook

Volatility

Family

Directional

Level

Intermediate

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 97.5	1	Delta 30
B	Long	Call 105	1	Delta 30

What it is

A put bought at A below the price and a call bought at B above it, both in the same expiration and both out of the money.

It is a long straddle with the strikes pulled apart. Two out-of-the-money options cost less than two at-the-money ones, so the debit is smaller — and the price for that is a wider gap the underlying has to clear before either leg is worth anything.

The payoff

At expiration

A U shape with a flat bottom between the two strikes: the full debit is lost anywhere between A and B, and the position gains outside them.

A U rather than a V:

• Between A and B — both expire worthless and the whole debit is lost. This is the worst case, and unlike a straddle it covers a range of prices rather than a single one.
• Below A or above B — one leg is in the money and gains with the move.

Break-evens are A minus the debit and B plus the debit. They sit further apart than a straddle’s on the same underlying, which is the trade being made.

How it behaves before expiration

Today, before expiration

Today's value is a smooth curve above the U, with the flat bottom replaced by a shallow trough.

The flat bottom becomes a shallow trough. Between the strikes the position is still worth something, because both options carry time value, and that value drains as expiry approaches.

The decay is slower than a straddle’s per day and there is more of it to survive: a strangle usually needs longer to work, and has more distance to cover when it does.

The Greeks

Delta is near zero between the strikes and builds as the price approaches either one.

Gamma is positive but lower than a straddle’s, and spread over two strikes rather than concentrated at one.

Theta is negative. Less per day than a straddle, because out-of-the-money options are cheaper, and paid for longer.

Vega is positive. Out-of-the-money options are often the most sensitive to a change in implied volatility in percentage terms, which makes this structure a direct expression of that exposure.

Where it lives in the volatility environment

Practitioners generally describe a strangle as the cheaper way to be long volatility, and note that the saving is in premium rather than in probability: the wider break-evens mean the underlying has further to travel. Where implied volatility across strikes is elevated in the wings, the two legs cost more relative to an at-the-money pair, and the comparison with a straddle shifts.

What can go wrong

• The dead zone is wide. Everything between A and B loses the full debit, and that is a range rather than a point.
• Being right about direction is not enough. A move that stops short of a break-even still loses.
• Both wings decay together and neither is offset by anything sold.
• Wing liquidity. Out-of-the-money strikes can carry wide markets, and the structure crosses four of them over its life.
• Assignment is not a risk here — both legs are long — but exercising rather than selling a winner abandons whatever time value it still has.

Building it in Option Panel

Open Build Strategy and pick Long Strangle. The two strikes are chosen independently: by delta on each side, by percentage or points from the price, by an offset from the underlying, or as exact strikes. Matching deltas on the two wings is the usual starting point for a symmetric structure.

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

Related strategies

• Long Straddle — the same view at one strike: more expensive, closer break-evens.
• Short Strangle — the other side, with the credit capped and the loss not.
• Iron Condor — a short strangle with both wings bought back, which bounds the loss.