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Long Strangle

Long Strangle

  • date-icon Sep-13-2024

Long Strangle

Market View

A big move up or down

The Trade

Buy a Put below stock price and buy a Call above the strike price. Your view is that if there is a breakout, the stock will cross either of these strikes by a margin

Premium

Pay

Margin

No

When To Do

  • When the stock is going to move big in one direction
  • Avoid buying high IV

Pros

  • Big Upside if there is a breakout

Cons

  • Low probability of success
  • High loss if the stock stays rangebound
  • High Vega risk and Theta Risk

Time and Volatility

  • Loses time value every day
  • Gain if IV goes up