Strangle

Strangle is an options strategy involving the purchase of both a call and a put option, with the call having a higher strike price than the put. The options are typically bought out-of-the-money, meaning both options have a strike price that is not at-the-money.

Strangles matter because they are used by traders who expect a significant price movement in the underlying asset, but are uncertain about the direction of that movement. For example, a trader might use a strangle if they believe a company's earnings report will cause substantial volatility, but are unsure whether the stock price will rise or fall. The strangle provides profit potential in either scenario, making it a useful strategy for traders seeking to capitalize on uncertainty.