Options Strategies
Long Strangle
Strategies Long Strangle
Component Buy lower strike price/level put, buy higher strike price/level call of the same month
Potential Profit
  • When the stock price/index level is below the lower break-even point, substantial and equals to lower break-even point minus stock price/index level
  • When stock price/index level is above the upper break-even point, unlimited and equals to stock price/index level minus upper break-even point
Maximum Loss Total premium paid
Time Value Impact Negative
  • The lower break-even point equals to lower strike price/level minus total premium paid
  • The upper break-even point equals to higher strike price/level plus total premium paid
Remarks Compared with Long Straddle, Long Strangle is less expensive to establish but requires higher market volatility to be profitable.
  Net Position +1 Jan 180 Put +1 Jan 200 Call

Component Buy ABC Jan $180 Put, pay $5, and buy ABC Jan $200 Call, pay $10
Net Premium Pay $5+$10=$15
  • Lower: $180-$15=$165
  • Upper: $200+$15=$215
Profit when Stock price is below $165 or above $215
Potential Profit
  • When the stock price is below $165, $165 - stock price
  • When the stock price is above $215, stock price - $215
Potential Loss $15
Time Value Impact Negative