1. Long Strangle
- Overview
Long strangle is an options strategy where you buy a call and a put with different strike prices but the same expiration date. This strategy profits from large price movements in either direction, and often uses out-of-the-money options to reduce costs.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Call value increase |
Fall | Put value increase |
- Case study
Let's imagine a made-up company called TECH.
Right now, TECH's stock price is $100 per share. With its earnings report approaching and significant market disagreement on future price direction, you anticipate the stock will experience a large price movement but are unsure of the specific direction, so you decide to use a Long Strangle strategy.
You buy one Call option with a strike price of $110, paying a premium of $3 per share. Simultaneously, you buy one Put option with a strike price of $90, paying a premium of $2 per share.
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2. Short Strangle
- Overview
Short strangle is an options strategy where you sell a call and a put with different strike prices but the same expiration date. This strategy profits when the asset’s price stays near the strike price.
- Features
- Components
- Profit source
Underlying price | Source |
Rise | Premium from out-of-the-money calls |
Fall | Premium from out-of-the-money puts |
- Case study
Let's imagine a made-up company called TECH.
Right now, TECH's stock price is $100 per share. Given its recent low volatility in a stable market environment, you think the stock price will remain stable in the near future, so you decide to use a Short Strangle strategy.
You sell one Call option with a strike price of $110, receiving a premium of $3 per share. Simultaneously, you sell one Put option with a strike price of $90, receiving a premium of $2 per share.
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Risk Warning
On option expiration day, before market close (11:00–14:00 EST), Longbridge will dynamically calculate the buying power required to exercise in-the-money or near-the-money options and adjust margin requirements accordingly. If your account has insufficient buying power, a margin call will be issued, which may lead to forced liquidation. If you hold an options strategy, Longbridge may liquidate the entire strategy at once, including all option contracts and the corresponding stock positions. Please plan your funds and positions in advance.