Strangle vs. Straddle

Strangles and Straddles are somewhat similar. Strangles are cheaper than straddles in general. A Long Straddle is a strategy where someone simultaneously buys an ATM call and an ATM put option. Whereas with a Long Strangle, someone simultaneously buys an OTM call and an OTM put option.

One can see that with a long strangle, the maximum loss of a strangle is less than the maximum loss of a straddle. The cost of the premiums for a strangle is also less than the total cost for a straddle. However, with a long Strangle, the breakeven points are further out than with a long straddle.

• Bet on volatility

• Non-Directional Strategy