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4.2. Strangle

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
+
IntermediateNeutralHigh• Long PutCappedUncappedCapital Gain
   • Long Call   


4.2.1. Description

The Strangle is a simple adjustment to the Straddle to make it slightly cheaper. Instead of buying ATM options, we buy OTM calls and puts, which creates a lower cost basis and therefore potentially higher returns. The risk we run with a Strangle is that the breakevens can be pushed further apart, which is bad, but where the difference is not too great (and that's a judgment call), then the Strangle can be spectacular.


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