Name: Long Strangle
Setup: Buy (long) Strike A put and Buy (long) Strike B call
Bias: Extreme Bullish and Extreme Bearish
Break-Even: Two break-even points:
- Strike A – Debit paid
- Strike B + Debit paid
Max Profit: Unlimited
Max Loss: Debit paid
Margin: No margin requirement
Time Decay: Time decay has an extreme negative effect since it will lower the value of both of your options.
Implied Volatility: After the position has been established you want implied volatility to increase. This will increase the value of your options plus help make the anticipated move.
Notes: A Long Strangle position is a hard position to profit from. You will need a big move that the market hasn’t accounted for in a quick period before time decay eats the value from your options.
Featured in Trade Review: None at this time
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