Long Strangle

Description

Buying both an OTM Call and an OTM Put.

Trading Logic

Bets on high volatility with lower cost than a Straddle.

Practical Example

Stock at $100. Buy $110C ($2) and $90P ($2). Total cost: $4.

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P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss