Long Strangle

A Long Strangle is an Options trading strategy that involves buying a call option and a put option with the same expiration date but different strike prices. The call option has a higher Strike Price, while the put option has a lower strike price. This strategy is employed when an investor anticipates significant volatility in the underlying Asset but is uncertain about the direction of the price movement.

For example, if a Stock is currently trading at $50, an investor might buy a call option with a strike price of $55 and a put option with a strike price of $45. The investor profits if the stock moves significantly above $55 or below $45, offsetting the premium paid for both options.

In a case where the stock moves to $60 at expiration, the call option is in-the-Money, allowing the investor to profit. Conversely, if the stock drops to $40, the put option is in-the-money. However, if the stock remains between $45 and $55, both options may expire worthless, resulting in a loss equal to the total premium paid.