A strangle is a non-directional options strategy where a trader buys:
One put option at a lower strike price
One call option at a higher strike price
Both options must have the same underlying asset and the same expiration date
The goal is to profit from a large move in the underlying asset, regardless of the direction.
Unlike a straddle, where both options have the same strike, a strangle is set wider apart — making it cheaper to enter, but it requires a larger move to become profitable.
Market Scenario: When to Use It
Use a strangle when:
You expect high volatility, but don’t know which way the market will go
There is an upcoming event (earnings, policy decisions, elections)
The stock or index is trading in a tight range and a breakout is expected
You want a cheaper alternative to a straddle, with limited risk
Example: Long Strangle Setup
Assume Stock XYZ is trading at ₹100.
You execute the following:
Buy ₹95 put option for ₹4
Buy ₹105 call option for ₹3
Total premium paid = ₹4 + ₹3 = ₹7
This ₹7 is the maximum possible loss.
Breakeven Points
Upper breakeven = ₹105 + ₹7 = ₹112
Lower breakeven = ₹95 – ₹7 = ₹88
Profit occurs only if the stock moves beyond ₹112 or below ₹88.
Payoff Table
Stock Price at Expiry
Put Option Value
Call Option Value
Net Profit/Loss
85
10
0
+3
88
7
0
0
95
0
0
–7
100
0
0
–7
105
0
0
–7
112
0
7
0
120
0
15
+8
Key Metrics
Feature
Value
Max loss
₹7 (total premium paid)
Max profit
Unlimited (if price breaks out)
Breakeven zone
₹88 to ₹112
Best outcome
Strong move beyond breakevens
Market outlook
Highly volatile
Strangle vs Straddle
Feature
Straddle
Strangle
Strike prices
Same for call and put (ATM)
Different (OTM call + OTM put)
Cost
Higher
Lower
Breakeven points
Closer to current price
Farther from current price
Profit requirement
Smaller move required
Larger move required
Use case
Volatility expected, less aggressive
Strong volatility expected
Summary
A strangle is a low-cost, non-directional strategy used to profit from large price movements in either direction
It involves buying a put and a call with different strike prices, both out-of-the-money
Maximum loss is limited to the premium paid if the stock stays within the strike range
Profit occurs when the stock breaks out of the breakeven zone, either above or below