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Options Strangles

Options Strangles Explained

13 min read

Options strangles involve buying both a call and a put contract, which includes the same strike prices and expiration dates. You are looking for a big move in the underlying stock—the stock price needs to move in either direction to profit. Strangles give you more room to profit in either direction and are cheaper than straddles. They are great for speculative trading. 

Options strangles involve buying a call and a put with the same strike prices and expiration date. You purchase when you believe the stock will move in either direction. Price needs to go dramatically in one direction to profit. The second contract will take the loss.

Options trading has many different strategies. You can hedge your bets or trade based on speculation. Options strangles are great for speculation. Since direction is important to trading, watch our video on how to trade them. 

Who wants to make money no matter what the market is doing? The market trades sideways often, and it can be hard to find plays. Hence, that is why options trading has become so popular. 

There are beginner to advanced strategies with options. As a result, you can make money no matter what the market is doing, whether up, down, or sideways.


One such advanced strategy is options strangles. But before we get into strangles, we must first understand the basics.

What is an option? An option gives you the right but not the obligation to buy (call) or sell (put) at a set price within a certain time. One contract controls 100 shares, and they expire.

Calls and puts make up every option strategy. Essentially, they’re the foundation of options and a good thing to understand.

A great thing about options is trading large-cap stocks without shelling out the capital. It is a great way to grow a small account.

Without a safe penny stocks list, you’re susceptible to the manipulation of the sector. You can’t pump and dump options because they’re larger caps. 

However, remember that options have more moving parts than stocks. That can affect things like options strangles.

Options Strangles Definition

Investopedia defines options strangles as a strategy where the investor holds a position in both a call and a put option with different strike prices but the same expiration date and underlying asset.

It sounds a little like vertical spreads, right? Something you’ll find the deeper you get into options is that the strategies are similar.

However, options strangles are a little different because they’re not purely directional while still being directional. Sounds confusing, right?

How to Day Trade Options Strangles

When Should You Buy an Options Strangle?

You should buy options strangles when you know the stock will move but are unsure of the direction. As a result, you’re covering your bases. However, here’s where direction comes in. You need to stock to make a dramatic move in one direction. Therefore, you will end up taking a loss on the contract that’s headed in the other direction.

So, while direction is mandatory, it’s different from most options and strategies because you don’t have to be spot-on in choosing direction.

How to Build a Strangle

Options and strangles are formed when you buy a call and a put. However, you want them to have different strike prices.

Since options expire, you want options strangles to have the same expiration date. To recap, you want different strikes with the same expiration.

Many times, your broker will have options strangles already built for you. However, you can go in and edit strikes if needed.

Check out our trading service to learn more about trading different options strategies. 

Options Strangles Example

Options Strangles

This is an example of an options strangle and options chain in the ThinkorSwim platform. This chain shows the Options Greeks such as delta, gamma, theta, and vega. There are also options to show intrinsic value and extrinsic value.

A Real Life Example

Let’s say you’re looking at trading AMD. You decide you want to trade a strangle. So you buy a call and a put.

The call has a strike price of $31.50. The put’s strike price is $31. That’s the prepopulated strikes on TOS. You can go in and change them if you’d like. 

The premium to place the trade is $190. Therefore, you’re risking $190 with the potential of infinite profit.

With long options strangles, you want volatility. You’re losing your paid premium if the price stays between the strikes.

If volatility comes in, you will profit on the side that moves most. However, you will take a loss on the contract headed in the opposite direction.

You usually make a profit because you need that large price movement. And you’ll only lose the premium paid for the losing trade.

Want to see options strategies in action? Check out our live trading room.

Day Trading Course Options Trading Course Futures Trading Course
DESCRIPTION Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action
Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading

What Is the Difference Between a Straddle and a Strangle?

Options straddles and strangles are strategies that benefit from large moves in a stock’s underlying price in either direction. A strangle has two different strikes, and a straddle has one strike.

There are two strategies known as strangles and straddles. How are they different? We know that options strategies often have different names for the same strategy.

Options strangles and straddles are quite similar. They both profit from large moves in either direction. The difference comes in how you put the trade together.

A long straddle involves buying at the money calls and puts where the strike prices are the same as the stock price. Strangles should be out of the money.

Short straddles and strangles are very similar. You’re the options seller, and you benefit from more neutral moves.

Are Option Strangles Profitable?

Options straddle profit when the price moves from the strike price in the amount of the premium paid. For example, if you paid $190 for a straddle, you’d only need the stock to move in an amount equivalent to $190 in either direction to profit.

Therefore, you don’t need as much of a significant spike in price. However, that makes options strangles less expensive than strangles.

The greater the risk, the less expensive. The seller of the risky option wants you to take it because they have a higher probability of profit, hence why it’s cheaper. 

Profit From a Neutral Position

Since far-out-of-the-money options tend to have relatively low Delta and Delta will advance more rapidly than decline relatively to price action when far out of the money, we have a great advantage. With only a couple to a few days to expiration, time decay will affect this position. Though you can also swing trade a strangle position with 30+DTE, we are only interested in holding our position for less than 15 minutes.

There are two ways to get Shwifty here. If the flag breakout has good momentum, the Delta skew will add profit to the position. I.E., the losing leg will decline in value much less than the winning leg will appreciate. If the breakout trend ends abruptly, you may not have time to leave the position.

In this case, you can close the entire position to make a profit.

This Is Sparta

Now for the second and ideal way to close the position for a substantial profit. If you find the momentum in the breakout is strong and likely to continue, you can clean up.

All you need to do is sacrifice the losing leg and let the winner prosper unburdened by the loser until the trend is exhausted.

I will generally sacrifice the loser when the loss is about 10%. When I demonstrated this strategy during a Livestream, I took a 127% gain, less than the 10% loss, in just 8 minutes. That’s 117% in 8 minutes!

How’s that for an options strategy that the average beginner options trader can trade? So make sure you know how to day trade options strangles.

The more strategies you know, the more trades you can take. However, make sure you don’t try to learn so much you can’t perfect the styles that work best for you.


Sometimes, a somewhat dark sense of humor can bring a delightful flair to the otherwise drab process of explaining complex things to an audience. It also makes the complex knowledge entrained within the delightful banter much more memorable… Author Unknown.

You may have heard about the history of Sparta, wherein the populace sacrificed the weak in favor of the strong. Anyway, during our Livestream sessions, we engage our community members with light-hearted conversations about trading strategies, and humor often ensues. Although knowing how to day trade options strangles is nothing new, how we trade them is a bit unique with legging in and out of the position.

During my explanation, I used the word “sacrifice” instead of “close” when closing the losing leg of the position. A little back-and-forth hijinx later, we decided to aptly name our somewhat unique strategy. Henceforth, we shall refer to this strategy as “The Spartan Strategy.”

What Setup Is the Best for a Strangle Entry?

While reversal patterns are pretty good for strangle entries, wedges or bear flags and bull flags AKA continuation patterns are best. Here’s why. Two reasons actually, firstly you can take advantage of 1-minute candles within a wedge to leg into your strangle with a small cushion of profit between them. Secondly, you can react quickly to a flag breakout more readily than you can while waiting for reversal confirmation.

What options strike do we buy? You can keep it really simple and I like simple. One can take a few extra seconds to analyze dollar shift in order to choose the right strikes but time is precious. Sometimes you will only have a few seconds to get this right.

Using SPY as an example I simply flip open the options chain anywhere between 2 to 5 days to expiration and look for premium between $0.38 to $0.42 and focus on timing my legging in. One strangle position should only have an outlay of around $80.

The above also works well for QQQ but not much else. Each equity will have a different options flow and one strike premium price range will not work for everything.

Pros and Cons of Options Strangles

A great plus side to options strangles is the ability to profit in either direction. Strangles are cheaper than other strategies like a strangle.

Therefore, you’re not investing as much capital to play both sides of a trade. As a result, you’re given unlimited profit potential.

One downside is the fact that it is risky. It would be best to have a price to move a large amount in one direction. That can be more difficult on days when the market is trading sideways.

However, large-cap stocks tend to have larger price swings. That’s why trading options on the large caps is so profitable.

Final Thoughts

Direction is an important part of stock market trading. The moving parts of options can affect both profit and loss. Hence, there is a need to be able to read charts.

Options strangles allow for profit in either direction. However, if you bought a naked call or put and the trade goes against you, you could be out the entire premium paid. 

Strategies like spreads, straddles, and options strangles are meant to cap risk. However, remember that strangles are riskier because the profit isn’t capped.

Option strangles need a big price move in one direction. Therefore, you want to be able to see the patterns for potential breakouts.

If you’re going in blind, you’re going to lose. It would be best if you had a plan with risky strategies.

Options strangles are a risky but lucrative strategy. As a result, you need to practice trading them beforehand to ensure you know the best times to take the trade. 

If you need more help, take our options trading course.

Frequently Asked Questions

  • The long strangle is the most common.
  • They are formed when you buy OTM calls and OTM puts together. 
  • The higher strike should be higher than where the stock is currently trading. The put strike needs to be lower than the current price.
  • The stock should be trading between the two strikes. Long strangles can have a large profit margin because there's no profit cap if the call side takes off.
  • The put side profits if the price falls a lot. The risk of the trade is limited to the premiums paid.
  • You have unlimited profit potential on either side. The loss would be how much you paid.
  • You will profit from this trade because the price will increase or decrease. However, the price needs to move a lot to profit.

  • The other way to trade options strangles is to take a short strangle position. With a short strangle, you're selling an out-OTM put and an OTM call.
  • This is a neutral strategy, and the profit potential is limited. For this to be profitable, you'd need a price to stay between the two strikes in a narrow range.
  • You can't have the large price moves. Therefore, this is like an iron condor because it's a neutral strategy.
  • Your max profit comes from being the writer of the strategy, also known as the seller. Hence, you're receiving the premiums for writing the two contracts. That makes for less trading costs.

Traders should look to buy a strangle when they expect a big move in the security price. They are popular to trade before earnings and product announcements.

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