Long Strangle
Outlook: Volatility
Volatility
Long 1 OTM call + long 1 OTM put. Cheaper than a straddle, needs a larger move.
Max profit
Unbounded in either direction.
Max loss
Total debit paid.
Breakeven
Call strike + total debit (upside) and put strike - total debit (downside).
Legs
Long
1×
put
ATM −5
Long
1×
call
ATM +5
Structure
Long 1 call above spot + long 1 put below spot, same expiration.
When to use
Same as straddle but with a larger expected move and a smaller cost.
Example
SPY at $450. Long 455 call $4 + long 445 put $4. Debit $8. Breakevens $437 and $463; same as the straddle but cheaper to enter.
Notes
- Dead zone between the two strikes pays nothing at expiration.
Build it in the simulator
Open this structure in the app, adjust spot, IV, and DTE, and watch the payoff and Greeks move.
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