Big move, either way
Long Strangle
A cheaper straddle that needs a bigger move.
Buy an out-of-the-money put and an out-of-the-money call. Like a straddle, it profits from a large move in either direction, but the strikes are spread apart so it costs less — at the price of needing an even bigger move to pay off. A lower-cost volatility bet.
Construction
Buy 1 lower-strike put + buy 1 higher-strike call.
Max profit
Large (a big move up or down)
Max loss
Both premiums paid (price between the strikes)
Breakeven
Below the put strike or above the call strike, by the total premium
Play with the payoff
Big move, either way
At expiryToday (30d, 30% IV)
Max profit
Unlimited
Max loss
−$7.50
Breakevens
$92.50 · $117.50
Best when
- You expect a very large move, direction unknown
- You want a cheaper alternative to a straddle
- You accept needing a bigger move to profit