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What is strangle strategy?
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What is strangle strategy?

A strangle is an options strategy where the investor holds a position in both a call and a put option of the same underlying security, same expiration date, but at different strike prices. A long strangle aims to make a profit when stock prices are expected to go up or down significantly and a short strangle earns a return when the stock prices are expected to stay stable or slight price change.

Long Strangle

A long strangle is a strategy when you expect the price of the underlying security will go up or down significantly within a certain time period. This strategy consists of a long call with a higher strike price and a long put with a lower strike price in the same expiration. This strategy is established for a net debit (or net cost) and profits if the underlying security rises above the upper break-even point or falls below the lower break-even point at expiration.

Short Strangle

A short strangle is a strategy when you expect the price of the underlying security will stay stable or move in a narrow range between the breakeven points within a certain time period. This strategy consists of a short call with a higher strike price and a short put with a lower strike price in the same expiration. This strategy is established for a net credit and profits if the stock price is between the two break-even prices at expiration.

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