What is a strangle?
Updated 6 June 2026 · by Theo Chen
A strangle is the budget version of a straddle: you buy an out-of-the-money call above the price and an out-of-the-money put below it, betting on a big move either way. Both legs start out of the money, so it is cheaper to open but needs a larger move to pay. The combined premium is your max loss.
Set the call strike above and the put strike below, and the calculator returns the net debit, both breakevens and the percentage move you need.
Open the Straddle & Strangle Calculator →How is a strangle built?
A long strangle uses two out-of-the-money legs at two different strikes:
- Buy 1 call at a strike above the current price.
- Buy 1 put at a strike below the current price, same expiration.
Out-of-the-money options are cheaper than at-the-money ones, so the strangle's net debit is lower than a straddle's. The catch is the gap between the strikes: the stock has to clear the higher call strike (plus the premium) or fall below the lower put strike (minus the premium) before either leg turns a profit.
Max loss, breakevens and profit
- Max loss = the net debit (call + put premium) × 100, lost if the stock finishes between the two strikes.
- Upper breakeven = call strike + total premium per share.
- Lower breakeven = put strike − total premium per share.
- Max profit = unlimited to the upside; large but capped to the downside.
The payoff diagram is a wider V with a flat bottom: the loss is the full debit across the whole zone between the strikes, then the position climbs once the stock clears either breakeven.
A worked example
With the stock at $100 you buy the $105 call for $2.00 and the $95 put for $2.00 — a strangle for a net debit of $4.00 per share, or $400 per contract. That $400 is your max loss, lost anywhere between $95 and $105 at expiration. Your breakevens are $109 ($105 + $4) and $91 ($95 − $4) — a wider band than the equivalent straddle, but for half the cost. Finish at $120 and the call is worth $15 — minus the $4 debit, that is +$1,100.
Buy the $105 call ($2) and the $95 put ($2) for a $400 net debit. Max loss $400 anywhere between $95 and $105; breakevens $91 and $109; profit grows beyond either.
Strangle or straddle?
Both profit from movement; the choice is cost versus the move required. A straddle costs more but starts paying on a smaller move; a strangle is cheaper but hungrier for a big one. Buy a strangle when you expect a really large move and want to keep the premium at risk small — and check the expected move against the breakevens before you commit. See Strangle vs Straddle for the full comparison, including the defined-risk ways to sell them.
The bottom line
A strangle is the cheaper, hungrier cousin of the straddle - the out-of-the-money strikes cut the cost, but the stock has to travel further before either leg clears the combined premium and the position turns a profit.
Frequently asked questions
What is a strangle?
A long strangle buys an out-of-the-money call above the stock price and an out-of-the-money put below it, on the same expiration. Like a straddle it profits from a big move in either direction — but because both legs start out of the money, it costs less to open and needs a larger move before it pays. The combined premium is the most you can lose.
How much can you lose on a strangle?
The full premium paid — the call premium plus the put premium, times 100 per contract. You lose all of it if the stock finishes between the two strikes at expiration, where both options expire worthless. As with any long option position, the debit is the hard cap on the loss.
How are the breakevens on a strangle calculated?
The upper breakeven is the call strike plus the total premium per share; the lower breakeven is the put strike minus it. Because the strikes are already apart, those breakevens sit further from the current price than a straddle's — the stock has to travel further before either leg covers the combined cost.
Is a strangle cheaper than a straddle?
Yes. Both legs of a strangle are out of the money, so they cost less than the at-the-money options of a straddle — a lower net debit and less capital at risk. The trade-off is that the stock has to move further before a strangle turns a profit. A straddle costs more but starts making money on a smaller move.
When should you use a strangle?
Use a long strangle when you expect a large move but want a cheaper entry than a straddle and are willing to need a bigger move to pay off — for example, ahead of a high-uncertainty event when implied volatility still looks underpriced. The same warnings apply: time decay and a post-event volatility crush both work against it.
Related questions
- Is a strangle cheaper than a straddle?
- What is the expected move and how far does a strangle need price to travel?
- How do iron condors compare to selling strangles?
- What is implied volatility and how do I tell if it is cheap?
Run the numbers
Compute a strangle's net debit, breakevens and the move it needs in the Straddle & Strangle Calculator, size the move with the Expected Move Calculator, judge whether volatility is cheap with the IV Rank Calculator, and weigh it against the at-the-money version in What Is a Straddle?
Educational explainer only — not financial advice. A long strangle can lose its entire premium, and time decay plus a post-event volatility drop work against it. Size positions to your own risk tolerance.