> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/option-strategies/strangle.md).

# Strangle

## Long Strangle

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A Long Strangle is the simultaneous purchase of an OTM Call and an OTM Put, with the same expiration.
{% endhint %}

**Payoff Diagram:**

![](/files/5nyN0AfELnZrB6vTwjsa)

**Direction Assumption:** Neutral

**Maximum Profit:** Unlimited 

**Maximum Loss:** Limited to net debit paid.\
Maximum Loss occurs when the underlying is between the two strike prices at expiration, where both the Long Call and Long Put expires worthless.

**Breakeven Price:** \
• On the lower end, Long Put strike minus the net debit paid.\
• On the higher end, Long Call option strike plus the net debit paid.

**Theta:** Passage of Time -> Negative Effect\
The net effect of time decay is negative. 

**Volatility:** \
If Volatility decreases -> Negative Effect.\
If Volatility increases -> Positive Effect. \
\
Long Strangles are Vega positive, meaning that if volatility increases, the position gains value.\
Therefore, Long Strangles are best to be entered when volatility is relatively low.

## Short Strangle

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A Short Strangle is the simultaneous sale of an OTM Call and an OTM Put, with the same expiration.
{% endhint %}

**Payoff Diagram:**

![](/files/JWU3lxUnC7i3aMJGuxQ3)

**Direction Assumption:** Neutral

**Maximum Profit:** Limited to the net credit received.\
Maximum Profit occurs when the underlying is between the two strike prices at expiration.

**Maximum Loss:** Unlimited

**Breakeven Price:** \
• On the lower end, Short Put strike minus the net debit paid.\
• On the higher end, Short Call strike plus the net debit paid.

**Theta:** Passage of Time -> Positive Effect\
The net effect of time decay is positive. 

**Volatility:** \
If Volatility decreases -> Negative Effect.\
If Volatility increases -> Positive Effect. \
\
Long Strangles are Vega positive, meaning that if volatility increases, the position gains value.\
Therefore, Long Strangles are best to be entered when volatility is relatively low.