What is a Long Strangle?
A Long Strangle is an options strategy in which a trader speculates on a large increase or decrease in stock price, and large increase in volatility. To open a Long Strangle, a trader pays a premium to buy one out of the money put and one out of the money call simultaneously, of the same expiration date but different strikes. The goal of this strategy is to capitalize on a large upward or downward movement on the underlying stock. The max loss on this strategy is the cost of entry; that is, if both contracts purchased go to $0, the max loss is whatever premium was paid to open the position. The max profit is hypothetically infinite, as the Call contract can hypothetically keep rising until it expires as the stock price rises, while the Put contract can only go to $0.