Definition
A long strangle is a multi-leg options strategy that combines the purchase of an out-of-the-money call and an out-of-the-money put with the same expiration but different strike prices. The call strike sits above the current price and the put strike sits below it.
Like a straddle, it is a non-directional volatility bet. Unlike a straddle, both legs start out of the money, which makes the position cheaper to open but requires a larger move to profit.
Why it matters
How it works
The trader pays two premiums, both for out-of-the-money options, so the upfront cost is lower than a comparable straddle. The trade-off is a wider profit zone gap: the underlying must move past the call strike on the upside or the put strike on the downside — and then far enough beyond to recover both premiums — before the position turns profitable.
A strangle therefore appeals when a trader expects an unusually large move and wants to keep capital outlay small. If the underlying drifts and stays between the two strikes, both options decay and the full premium is lost. Falling implied volatility also hurts the position, since it cheapens both legs.