Long Strangle | Options Strategy

A simple options strategy for volatile markets →

Hey there!

Bringing to you an options strategy for volatile markets - the Long Strangle.

➡️  A Long Straddle can be applied when we expect markets to be highly volatile and expect a big change in stock price in either direction.

➡️ It is implemented by buying a call with a higher strike price and a put with a lower strike price with the same expiration date.

➡️ The maximum loss will be restricted to the premium paid, while the profit can be unlimited.

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Let’s understand the long strangle strategy with the help of an example:

➡️ Assume we take the following positions in ABC Ltd.’s option :

  • Buy a 2,000 call option for ₹20

  • Buy a 1,900 put option for ₹20

Considering a lot size of 250, the premium paid for this position is ₹40 per lot.

Let’s look at the payoff of such a position:

This position would yield a maximum loss of ₹10,000 and has unlimited profit potential.

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None of the above are intended as recommendations. Please consult a registered advisor before buying/selling.

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