Long Strangle
Buying an out-of-the-money call and out-of-the-money put with the same expiration to seek a large move.
What is a Long Strangle?
Buying an out-of-the-money call and out-of-the-money put with the same expiration to seek a large move.
Construction
Buy a higher-strike call and a lower-strike put with the same expiration.
When it may be studied
To study large-move exposure for a lower debit than a straddle, while requiring a wider move to reach profitability.
Expiration profile
Maximum risk: Total premium paid
Maximum reward: Unlimited upside; substantial downside payoff toward zero
Break-even: Call strike plus debit; put strike minus debit
Worked example
Buy a 105 call and 95 put for $5 total. Simplified break-evens are $110 and $90 at expiration.
Key risks and limitations
Both options can expire worthless. The wider break-even range means the underlying must move farther than with a comparable straddle.
Entry and exit checklist
- Confirm contract multiplier, expiration, exercise style, settlement, and liquidity.
- Calculate the maximum loss under the intended structure.
- Review earnings, dividends, corporate actions, and other event risks.
- Define an exit, adjustment, or expiration plan before entry.
- Understand what happens if one leg is assigned or exercised early.