# What is an Options Strangle?   An Options Strangle is created when we buy (or sell) one call option at a higher strike price + one put option at a lower strike price and same expiration date. When we buy the call + put option, we create a long strangle, and when we sell a call + put option, we create a short strangle.

## Options Strangle: What is a Long Strangle?

A Long Option Strangle is created by buying a call option at a higher strike price and a put option at a lower strike price with the same expiration date. In the example above, we are buying an AAPL \$170 strike call + an AAPL \$150 strike put – both with the same expiration date of 21 Jan 2022.

### Is Long Strangle a Net Debit or Net Credit Trade?

Since we need to pay premium to buy both the call and put options, a long strangle is a net debit trade. In the example, we are paying \$13.35 to buy the \$150 strike put and \$3.80 to buy the \$170 call i.e. a total of \$17.15/per share or \$1,715.00 for the long strangle (100 shares).

### What is the Maximum Profit in a Long Strangle?

The maximum profit in a long strangle is unlimited because it contains a long call option. If the stock price skyrockets, the profitability of call option (hence the long strangle) is practically unlimited.

### What is the Maximum Loss in a Long Strangle?

The maximum loss in a long strangle is limited to the net debit paid to create the strangle. In this example the maximum loss is \$17.15/share or \$1,715 for the strangle (100 shares).

### What is the Breakeven Point of a Long Strangle?

Long Strangle has two breakeven points, one lower than the strike of the put options, and one higher than the strike price of the call option.

The breakeven points are the following:

• lower breakeven point = strike price of put (i.e. lower strike price) – |net debit|
• and, higher breakeven point = strike price of call (i.e. higher strike price) + |net debit|

The long strangle is profitable above the higher breakeven point AND below the lower breakeven point.  ### Long Strangle: Zones of Profit and Loss

The maximum loss in a long strangle is observed when the stock price is between the two strike prices of the call and put options. The loss reduces as the stock price moves below the lower strike price or above the higher strike price. The long strangle becomes profitable when the stock price goes below the lower breakeven point or goes above the higher breakeven point.

In this example, the maximum loss is \$17.15/share or \$1,715. The maximum profit is unlimited, when the stock price goes up and above the higher breakeven point. The profit is limited to \$133/share if the stock price goes below the lower breakeven point, down to \$0/share.

## Options Strangle: What is a Short Strangle?

A Short Option Strangle is created by selling a call at higher strike price and a put option at a lower strike price with the same expiration date. In the example above, we are selling an AAPL \$170 strike call + an AAPL \$150 strike put – both with the same expiration date of 21 Jan 2022.

### Is Short Strangle a Net Debit or Net Credit Trade?

Since we collect premium when we sell both the call and put options, a short strangle is a net credit trade. In the example, we are collecting \$13.35 while writing the \$150 strike put and \$3.80 while writing the \$170 call i.e. a total of \$17.15/per share or \$1,715.00 for the short strangle (100 shares).

### What is the Maximum Profit in a Short Strangle?

The maximum profit in a short strangle is limited to the net credit, i.e. \$17.15/share in our example.

### What is the Maximum Loss in a Short Strangle?

The maximum loss in a short strangle is practically unlimited. Because we are selling a call option, if the stock price skyrockets, the sold call option can bring us huge losses.

### What is the Breakeven Point of a Short Strangle?

Short Strangle has two breakeven points, one lower than the strike price of the put option, and one higher than the strike price of the call option.

The breakeven points are the following:  • lower breakeven point = strike price of the put option (i.e. lower strike price) – |net credit|
• and, higher breakeven point = strike price of the call option (i.e. higher strike price) + |net credit|

The short strangle is profitable in between the higher breakeven point and the lower breakeven point.

### Short Strangle: Zones of Profit and Loss

The maximum profit in a short straddle is observed when the stock price is between the strike price of the call and put options. The profit reduces as the stock price moves below the strike price of the put option or above the strike price of the call option. The short straddle loses money when the stock price goes below the lower breakeven point or goes above the higher breakeven point.

In this example, the maximum profit is \$17.15/share or \$1,715. The maximum loss is unlimited, when the stock price goes up and above the higher breakeven point. The loss is limited to \$133/share if the stock price goes below the lower breakeven point, down to \$0/share.

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