Long Strangle Calculator

A long strangle buys a put below the current price and a call above it on the same expiry. It is a cheaper straddle: the strikes are out of the money so the premiums are smaller, but the stock has to move further before either option is in the money. It profits from a large move in either direction.

When it is used

Strangles are bought ahead of binary events when a trader expects a large move and wants to risk less than a straddle costs. The wider the strikes the lower the cost and the larger the move required. They are also bought as a long-volatility position when implied volatility looks too low for the news ahead.

How it makes and loses money

A big move or a jump in implied volatility pays. Standing still loses, through time decay on two options that are both out of the money and therefore decay to nothing. The post-event fall in implied volatility is the typical way a strangle loses even when the stock moved in the right direction but not far enough.

What to check in the grid

The flat zone between the strikes on the expiry column is the region of total loss. Compare it with the early columns, where the same prices are only partial losses because the options still have time value. The breakevens tile shows how far the stock has to go by expiry.