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Strangle

Buying (or selling) an out-of-the-money call and an out-of-the-money put with the same expiration; cheaper than a straddle but needs a bigger move.

Payoff of a long straddle at expiryA V shape with its point at the strike and both arms rising through zero as the price moves away.Profit / loss per share08090110120Profit if the move is big enough, in either directionStrike 100Breakeven 92Breakeven 108Max loss 8 — both premiums, if it finishes at 100Underlying price at expiry
Long straddle: payoff at expiry. A 100 call and a 100 put bought together for 8 make a V. A quiet market that ends near 100 costs the whole 8; the position only turns positive once the price finishes below 92 or above 108, whichever way it goes.

A long strangle costs less than a straddle because both options are out-of-the-money, but the stock must move further before it profits. A short strangle collects less premium than a short straddle but has a wider profit zone.

Short strangles are a common premium-selling strategy and the undefined-risk cousin of the iron-condor.

Example: stock at $100. Buy the $110 call for $1.50 and the $90 put for $1.50. Cost $3. Breakevens are $113 and $87.

Related: straddle, iron-condor, out-of-the-money, implied-volatility

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