Strategy
Long strangle
Buy an out-of-the-money call and an out-of-the-money put. Cheaper than a straddle, but needs a bigger move to pay off.
View: big moveDebit (you pay)Limited risk
How it is built
- Buy 1 lot of an out-of-the-money call.
- Buy 1 lot of an out-of-the-money put, same expiry.
A structure for a view that the index will move sharply in either direction.
Risks
- Both premiums are lost if the index ends between the strikes.
- Out-of-the-money options lose value quickly as expiry approaches.
- Falling implied volatility hurts both legs.
How the Greeks behave
- Delta
- Close to zero at the start
- Theta
- Negative
- Vega
- Positive
Worked example on Nifty 50
| Leg | Premium per unit | Cash flow |
|---|---|---|
| Buy 1 lot 25,500 CE | ₹44.20 | −₹2,873 |
| Buy 1 lot 24,500 PE | ₹32.49 | −₹2,112 |
Net paid
₹4,985
Max profit
Unlimited
Max loss
₹4,985
Break-evens
24,423 / 25,577
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Long strangle on other indices
Frequently asked questions
Strangle or straddle: what is the difference?
A strangle uses different strikes outside the current level, so it costs less but needs a larger move to break even.
What is the maximum loss on a long strangle?
The combined premium paid, if the index ends between the two strikes.
Where are the break-evens?
The call strike plus the combined premium, and the put strike minus the combined premium.