Strangle (Long)

Psychology:

The long strangle refers to buying a single put option and a single call option. The long strangle is comparable to the long straddle with the difference being that there is a difference between the strike prices in a strangle. The best time for an investor to use a long strangle is when they are bullish toward volatility, but do not know which direction the market will shift. Any anticipated information or news that may significantly affect an underlying asset’s share price in one direction or another is an example of when the long strangle is appropriate.

Risk / Reward:

Maximum Loss: Limited to the premium that is paid for the options.

Maximum Gain: Unlimited.