Long Strangle

A Long Strangle involves buying a call option and a put option at different strike prices but the same expiry. It profits from significant price movement in either direction.

• Ideal for high-volatility conditions, where a large price move is expected but at a lower cost than a straddle.
• Buying OTM options reduces the upfront premium cost.
• Risk is limited to the premium paid for both options.
• Profits occur if the price moves beyond the breakeven points on either side.

Example:

• NIFTY trading at 18,000.
• Buy 18,200 Call at ₹100 and 17,800 Put at ₹90 (lot size = 50).
• Outcome:
  1. If NIFTY rises to 18,400 at expiry:
     • Call gain = ₹200 × 50 = ₹10,000.
     • Put expires worthless.
     • Net profit = ₹10,000 − ₹9,500 = ₹500.
  2. If NIFTY falls to 17,600 at expiry:
     • Put gain = ₹200 × 50 = ₹10,000.
     • Call expires worthless.
     • Net profit = ₹10,000 − ₹9,500 = ₹500.
  3. If NIFTY stays between 18,200 and 17,800:
     • Both options expire worthless.
     • Net loss = ₹9,500.