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.