Long strangle strategy
The long strangle is a non-directional strategy similar to the long straddle, but using OTM options at different strikes instead of ATM options at the same strike. This makes it cheaper than a straddle but requires a larger move to become profitable.
Bias: Neutral (expects very large move) Risk profile: Defined (total debit paid) Ideal conditions: Low IV rank, expectation of explosive move (well beyond implied move)
How it's constructed
- Buy an OTM call at a strike above the current price
- Buy an OTM put at a strike below the current price
- Same expiration, net debit paid , lower cost than a straddle
Setup example
TSLA is at $260, major product event in 1 week.
- Buy the $275 call → pay $6.00
- Buy the $245 put → pay $5.50
- Total debit: $11.50 per share ($1,150 per strangle)
Max profit, max loss, breakevens
| Metric | Calculation | Value |
|---|---|---|
| Max profit | Unlimited (upside) / substantial (downside) | , |
| Max loss | Total debit paid | $1,150 |
| Upper breakeven | Call strike + total debit | $286.50 |
| Lower breakeven | Put strike − total debit | $233.50 |
TSLA must move beyond $286.50 or below $233.50 to profit , a much larger move required than the straddle, but at less than half the cost.
Long strangle vs long straddle
| Long straddle | Long strangle | |
|---|---|---|
| Cost | Higher | Lower |
| Breakeven range | Tighter | Wider |
| Profit if large move | Higher (closer to move) | Lower (further from move) |
| Best for | Moderate large move | Explosive, outsized move |
Related terms: Long straddle, short strangle, IV crush, expected move, OTM
Try it on Stryke: Use the Implied Earnings Move tool to assess whether historical moves have been large enough to justify strangle purchase costs.
Related terms
See it live
Apply what you learned with live data on Stryke.