Strategy reference
Long Strangle
A long strangle is a cheaper cousin of the long straddle: you buy a call above the stock and a put below it, paying less premium but needing a larger move to profit.
Structure
Buy one call at a higher strike and one put at a lower strike, both expiring on the same date. Both options usually start out-of-the-money — the call above where the stock is trading, the put below it.
Payoff at expiration
At expiration, you profit when the stock finishes either above the call strike by more than the total premium you paid, or below the put strike by more than the total premium. Your worst case is losing the entire premium, which happens any time the stock finishes between the two strikes. Two breakevens: the call strike plus your total premium, and the put strike minus your total premium.
- Stock price
- $100
- Buy
- 1 × $105 call @ $1.50
- Buy
- 1 × $95 put @ $1.50
- Net cost (debit)
- $3.00
- Max gain
- Unlimited above $108 / capped at $92 below
- Max loss
- $3.00 at any $95 ≤ S ≤ $105
- Breakevens
- $92.00 and $108.00
Frequently asked questions
What is a long strangle?
A long strangle buys a higher-strike call and a lower-strike put, both out-of-the-money and expiring on the same date. It is a cheaper cousin of the straddle but needs a larger move to profit.
What are the breakevens on a long strangle?
The breakevens are the call strike plus total premium (upside) and the put strike minus total premium (downside).
What is the maximum loss on a long strangle?
The maximum loss is the total premium paid. It occurs if the stock finishes anywhere between the two strikes at expiration.
This page is an educational reference, not investment advice. Numbers in the worked example are approximations for illustration only — real option prices depend on volatility, interest rates, dividends, and time to expiration. See the full disclaimer for details.