Strangle

A strangle combines an out of the money call and an out of the money put with the same expiration but different strikes. A long strangle buys both and profits from a large move in either direction. A short strangle sells both and profits if the underlying stays between the strikes. Strangles are cheaper than straddles to buy and collect less premium to sell, because both options start out of the money.

Long strangle#

Short strangle#

Short strangles are a core premium selling trade for experienced traders. They have a wide profit range and high win rates, but losses on large moves have no cap on the call side. Many traders buy protective wings, turning the short strangle into an Iron Condor.

Choosing strikes#

• By delta: sellers often use 15 to 20 delta options; buyers might use 25 to 35 delta options for more responsiveness. See Delta.
• By levels: outside support and resistance for sellers. See Support and Resistance.
• Skewed strikes: adjusting distances gives a directional tilt.

Because of volatility skew, out of the money puts on equity indices usually carry higher implied volatility than equally distant calls, so short strangles on indices often collect more on the put side. See Volatility Smile and Skew.

Strangle vs straddle#

See Straddle.

Managing strangles#

Long strangles

• Buy when implied volatility is low and a big move is likely.
• Close quickly after a large move.
• Exit if the move does not arrive before time decay speeds up.

Short strangles

• Take profits at 50% of the credit.
• Roll the untested side closer when price moves towards one strike.
• Size for crash scenarios, not normal days. See Position Sizing.
• Avoid events like earnings unless intended.

Common mistakes#

• Buying very far out of the money strangles that need extreme moves.
• Selling naked strangles in small accounts or with too much size.
• Ignoring correlation across many short strangles.
• Forgetting that volatility spikes hurt short strangles even before price reaches the strikes.

Frequently asked questions#

What is a strangle in options?#

Buying or selling an out of the money call and an out of the money put with the same expiration. A long strangle profits from large moves; a short strangle from a range.

What is the difference between a straddle and a strangle?#

A straddle uses one at the money strike for both options; a strangle uses two out of the money strikes, making it cheaper to buy but requiring a bigger move.

Is a short strangle risky?#

Yes. It has no cap on losses on the upside and large potential losses on the downside, so many traders add wings to make it an iron condor.

Next, learn uneven positions in Ratio Spreads.