- strangle
- A trading strategy using options that is designed to profit from material increases in the volatility of the underlying. Similar to a straddle but using only put and call options with strike prices that are out of the money. American Banker Glossary————buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. profits are made only if there is a drastic change in the underlying instrument's price. Bloomberg Financial Dictionary————The purchase of a put and a call, in which the options have the same expiration and the put strike is lower than the call strike, called a long strangle. Also the sale of a put and a call, in which the options have the same expiration and the put strike is lower than the call strike, called a short strangle. Chicago Mercantile Exchange Glossary————A type of option combination, similar to a straddle, where a call option and a put option on the same underlying asset with the same expiry date but different strike prices are either purchased (long strangle) or sold (short strangle). Strangles are generally entered into when a trader has a view on volatility, either that it will increase (long strangle) or decrease (short strangle). Long strangles have limited risk and unlimited rewards, whereas short strangles have limited reward and unlimited risks. When compared to straddles, strangles premiums are generally lower and have their breakevens further apart, i.e. a greater market movement will be required to make a long strangle profitable/short straddle unprofitable. Dresdner Kleinwort Wasserstein financial glossary————An option strategy involving one call and one put with different strike levels but with the same expiry date. LIFFE
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another name for straddle:• The strangle would be profitable if the stock price moves out of the 372p-444p range before expiry of the options on Nov 19.
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An option strategy involving one call and one put with different strike levels but with the same expiry date. The strategy produces a profit if prices break above or below a given range, effectively a bet on volatility.* * *
strangle UK US /ˈstræŋɡl/ noun [C] FINANCE, STOCK MARKET
Financial and business terms. 2012.
