Long Strangle - A Cheaper Bet on a Big Move
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Build a long strangle, state its maximum loss, maximum profit and two break-evens, and explain why it is cheaper than a straddle but harder to win with.
A long strangle is an options strategy that buys an out-of-the-money call and an out-of-the-money put on the same stock with the same expiration, so it profits if the stock makes a large move in either direction. It costs less than a straddle because both options start out of the money, but the stock has to travel further before either one pays.
Long Straddle bought both options at one strike. The strangle pulls the strikes apart: the put below today's price and the call above it. That changes three things at once: the cost, the break-evens and the stretch in the middle where the position loses everything.
How does a long strangle work?
You buy a put with a strike below the stock price and a call with a strike above it. If the stock finishes between the two strikes, both expire worthless. If it finishes below the put strike, the put has value; above the call strike, the call does. As with any long option, the most you can lose is what you paid.
Worked example
Buying the XYZ 45/55 strangle
XYZ trades at $50. You buy one XYZ 45 put and one XYZ 55 call, both expiring in 30 days. Prices are Black-Scholes model values at 30% implied volatility and a 4.5% interest rate. Figures are per share x 100, before fees and bid-ask spreads.
- Cost: the put is $0.20 and the call is $0.33, so the strangle costs $0.53 per share, or $53.
- If XYZ finishes anywhere from $45 to $55: both options expire worthless. You lose the full $53.
- If XYZ finishes at $58: the call is worth $3.00. Profit: ($3.00 - $0.53) x 100 = $247.
- If XYZ finishes at $42: the put is worth $3.00. Same $247 profit.
- Break-evens: $45 - $0.53 = $44.47 and $55 + $0.53 = $55.53.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
Long XYZ 45/55 strangle at expiration
Hover or tap the chart, or focus it and use the arrow keys, to read any price.
Open this trade in the free calculatorShow as table
What are the maximum profit, maximum loss and break-evens?
- Maximum loss: the total premium paid, $53 here, if the stock finishes anywhere between the two strikes at expiration.
- Maximum profit: unlimited on the upside; on the downside it is the put strike minus the total premium, $4,447 here, if the stock falls to zero.
- Break-evens: the put strike minus the total premium, and the call strike plus the total premium: $44.47 and $55.53.
So XYZ has to move more than $5.53 from $50, about 11.1%, by expiration. The straddle on the same stock needed only $3.43. The OIC's long strangle guide puts it plainly: strangles are less expensive than straddles, but a larger move is generally required to reach break-even.
Where a long XYZ 45/55 strangle stands at expiration
Below $44.47
Profit: the put is worth more than $0.53
$44.47 to $55.53
Loss, the full $53 between $45 and $55
Above $55.53
Profit: the call is worth more than $0.53
Why is a long strangle cheaper than a straddle?
Because both options are out of the money, their premiums are pure extrinsic value, and there is less of it the further a strike sits from the stock price. A call $5 above the stock pays anything at expiration only if the stock rises more than $5, which is less likely than a smaller rise, so the market charges less for it: $0.33 for the 55 call against $1.81 for the 50 call.
Cheaper does not mean safer in every sense. A strangle risks fewer dollars, but it loses its whole premium across a wide range: every finish from $45 to $55. A straddle loses its whole premium only at exactly $50.
How do time decay and volatility affect a strangle?
Like the straddle, the strangle owns two options, so time and volatility both matter.
- Time decay: in the calculator's pricing model, this strangle starts out losing about $2.94 per day. That is fewer dollars than the straddle's $5.70, but a much larger share of what you paid. If XYZ sits at $50 for 15 days, the strangle falls from $53 to about $14, losing about three-quarters of its value. (As in Long Straddle, that adds each leg's model price rounded to the cent, as the calculator's Auto premiums show them.)
- Implied volatility: the strangle is long vega, about +$5.81 per point of IV. A rise from 30% to 40% would lift it from $53 to about $122 with the stock unchanged, more than doubling it. A drop works the same way in reverse, which is why a strangle bought before an event can lose value after the event even when the stock moves.
The OIC guide frames the long strangle as a race between time decay and volatility: the clock costs money every day, and a rise in volatility is the main thing that can offset it before the stock moves.
How do you choose the strikes for a strangle?
There is no correct distance; each choice trades cost against the move you need.
- Closer strikes cost more and need a smaller move. Pushed all the way to one strike, a strangle becomes a straddle.
- Wider strikes cost less and need a larger move. They are also more likely to expire worthless.
- Matching your view: compare each pair of break-evens with the move you actually expect. If the move you expect does not clear the break-evens, the strangle is the wrong trade at that price.
- Equal distance is optional. If you think a drop is more likely than a rise, you can place the put closer to the stock than the call, which makes the position lean in that direction.
Check your understanding
An XYZ 45/55 strangle costs $0.53. Where are its break-evens at expiration?
Show answer
$44.47 and $55.53: the put strike minus the total premium, and the call strike plus it.
XYZ finishes at $53 at expiration. What is the strangle's result?
Show answer
A loss of $53, the full premium. $53 is between the two strikes, so both the 45 put and the 55 call expire worthless.
Why can a strangle lose a larger share of its value to time decay than a straddle on the same stock?
Show answer
Its premium is all extrinsic value from two out-of-the-money options, and with the stock unchanged most of that value decays away. In the example, 15 quiet days took the strangle from $53 to about $14, while the straddle kept about $243 of its $343.
Key takeaways
- A long strangle buys an out-of-the-money put and an out-of-the-money call with the same expiration.
- Maximum loss is the total premium; maximum profit is unlimited on the upside; break-evens are the put strike minus and the call strike plus the total premium.
- It costs less than a straddle but needs a bigger move: about 11.1% versus 6.9% in the XYZ example.
- It loses its whole premium anywhere between the strikes, and time decay takes a larger share of its value.
Common questions
What is a long strangle?
Buying an out-of-the-money call and an out-of-the-money put on the same stock with the same expiration. It profits from a large move in either direction, and the most it can lose is the total premium paid.
What is the maximum loss on a long strangle?
The total premium paid for both options. You lose all of it if the stock finishes anywhere between the two strikes at expiration, because both options then expire worthless.
How far out of the money should a strangle be?
There is no standard distance. Strikes further out cost less but need a larger move, and they lose a bigger share of their value if the move does not come. Many traders compare the break-evens with the move they expect, and choose strikes from that.
Can you lose money on a strangle if the stock moves?
Yes. If the move is smaller than the distance to a break-even, or if it comes after implied volatility has fallen and much of the time value has decayed, the strangle can still lose money.