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What is a long strangle?
Learn how a long strangle trades a lower upfront cost for more distant break-even prices
Prepared by Mark · Primary sources below
Direct answer
A long strangle buys a put at a lower strike and a call at a higher strike, with the same underlying and expiration. Compared with a long straddle, the options are usually cheaper because they are farther from the current stock price, but the stock typically needs a larger move to reach either break-even
The strikes leave a gap in the middle
The long put sits below the stock price and the long call sits above it when the position is opened. If the stock finishes between those strikes at expiration, both contracts can expire without intrinsic value
Lower entry cost changes the hurdle
The lower entry cost is a tradeoff, not a free improvement. At expiration, the upper break-even is the call strike plus total premium paid and the lower break-even is the put strike minus total premium paid
Compare it with the straddle on the same assumptions
A strangle and straddle both depend on movement and timing. Comparing their premiums, strikes, break-even points, and expiration outcome side by side makes the cost-versus-distance tradeoff explicit
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