Options strategies
Long strangle
Definition
Buying an out-of-the-money call and an out-of-the-money put with the same expiration. It costs less than a straddle but needs a larger move to reach its breakevens.
Example
Say a stock trades at $100 and you buy a $105 call for $1.80 and a $95 put for $1.60, paying $3.40, or $340, versus perhaps $780 for the $100 straddle. Your breakevens at expiration are $108.40 and $91.60, further out than the straddle’s. Anywhere between $95 and $105 at expiration, both options expire worthless and you lose the full $340.
Hypothetical numbers, for illustration only.
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