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A strangle is a popular options strategy that involves holding both a call and a put on the same underlying asset. A strangle covers investors who think an asset will move dramatically but are unsure of the direction. A strangle is profitable only if the underlying asset does swing sharply in price.

Long strangles involve buying a call with a higher strike price and buying a put with a lower strike price. For example, buy a 105 Call and buy a 95 Put. Long straddles, however, involve buying a call and put with the same strike price. For example, buy a 100 Call and buy a 100 Put.

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Short strangles have unlimited losses, and limited potential gains; however, they have a high probability of being profitable. The assumption of the short seller is neutral, in that the seller would hope that the trade would expire worthless in-between the two contracts, thereby receiving their maximum profit.

Since long strangles consist of two long options, the sensitivity to time erosion is higher than for single-option positions. Long strangles tend to lose money rapidly as time passes and the stock price does not change.

A short strangle is established for a net credit (or net receipt) and profits if the underlying stock trades in a narrow range between the break-even points. Profit potential is limited to the total premiums received less commissions.

On a PC, use the following shortcut to strike through text: Select the text you want to strike through. Press Ctrl+D. A font dialog box will appear. Press Alt+K. The strikethrough feature should now be selected. Press OK. The text will now have a line through it.