🔀

Long Strangle

Volatility Strategy

Use Zuviz's free options visualizer to build this strategy instantly. Buy an OTM call and OTM put. Cheaper than a straddle, but requires a larger move to profit.

⚡ Key Takeaways

  • Market Outlook: Large move expected, cheaper than straddle
  • Max Profit: Unlimited upside, put strike - premium downside
  • Max Loss: Total premium paid
  • Breakeven: Put strike - premium, call strike + premium
  • Best for: Volatility plays with wider breakevens (lower cost)
  • Greeks Impact: Negative Theta, positive Vega (but less than straddle)

💡 Visualize this strategy in 10 seconds: Open Zuviz →

Market Outlook
High Volatility
Max Profit
Unlimited
Max Loss
Total Premium
Breakeven
2 Points (wider than straddle)

📊 Payoff Diagram

Open in Zuviz →

🏗️ Strategy Structure

Leg Action Type Strike Premium
1 Buy Put $95 (OTM) $1.50
2 Buy Call $105 (OTM) $1.50

Total Cost: $1.50 + $1.50 = $3.00/share ($300/contract)

Breakevens: $92 (put strike - premium) and $108 (call strike + premium)

🧮 Key Calculations

🎯 When to Use This Strategy

  • Expecting huge move: Binary event with unknown direction
  • Lower budget: Want volatility exposure but straddle too expensive
  • Implied move > expected move: When you think the options are underpriced

📈 Greeks Impact

Delta (Δ)

Near Zero - You want the stock to stay still.

Theta (Θ)

Positive - Time decay is your best friend here.

Vega (ν)

Negative - You want volatility to decrease (IV Crush).

⚖️ Pros & Cons

Pros

  • Cheaper than straddle
  • Unlimited profit
  • Profits from huge moves

Cons

  • Lower probability of profit
  • Needs larger move than straddle
  • Time decay

📝 Real-World Example

Stock: ROKU at $80. Trade: Buy $90 Call & $70 Put.

Cost: $5.00. Breakeven: < $65 or > $95. Max Loss: $500.

🔗 Related Strategies

↕️ Long Straddle

Higher cost, narrower breakevens (ATM strikes)

🦅 Iron Condor

Opposite: profit from NO movement

Visualize This Strategy

See the payoff diagram in Zuviz.

Add to Chrome - Free