Strangle

Business / Taxes / Strangle: A strangle is hedging strategy in which you buy or sell a put and a call option on the same underlying instrument with the same expiration date but at different strike prices that are equally out-of-the-money. That is, the strike price for a put is above the current market price of the stock, stock index, or other product, and the strike price for a call is below the market price. If you buy a strangle, you hope for a large price move in one direction or another that would allow you to sell one of the contracts at a significant profit. If you sell a strangle, you hope there’s no significant price move in either direction so that the contracts expire out-of-the-money and you keep the premium you received.

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