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Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underlying instrument's price.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Strangle Strategy

An option strategy in which one buys two out-of-the-money options (usually one call and one put) on the same asset at different strike prices. One profits from a strangle position when there is a large price movement on the underlying asset, regardless of the direction. This is because one of the options will become in the money, so long as the price moves in one direction or the other. Loss only occurs if the price of the underlying asset remains largely the same.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


A strangle is a 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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
? The Stranglers, with special guests Therapy, will be bringing their Definitive Tour to the O2 Academy, Birmingham on Saturday, March 17.
ROCK ON The Stranglers will keep gigging till they get bored
The Stranglers will be bringing their Black and White tour to the Cardiff University Great Hall on Friday, March 18.
For The Stranglers it was a record-breaking UK tour with sell-out shows at venue after venue as music fans voted with their feet.
Scoring some 23 UK top 40 singles and 17 UK top 40 albums to date in a career spanning five decades, the Stranglers are the longest-surviving and most continuously successful band to have originated in the UK punk scene of the mid to late 1970s.
But one would quite rightly expect that the lion's share of proceedings will be taken up through the tuneful dipping into a back catalogue made up of four decades and 16 albums, which have been released throughout the band's many eras, starting in 1974 when they launched themselves as The Guildford Stranglers.
Stranglers' hits have featured on countless movie soundtracks and TV shows.
Clearly noone told The Stranglers the grand plan but then The Stranglers weren't like the rest of the punk crowd being more musical, more versatile and far, far superior musicians and bearing more influences of The Doors, Velvet Underground and The Who than The Stooges and the New York Dolls of their punk compatriots.
Cast, Britpop legends, will be taking to the Main Stage on Friday night as a support act for The Stranglers, performing some of their legendary hits.
PUNK legends e Stranglers will bring their unique sound to Middlesbrough in July.
HEADLINEGRABBING, controversial and downright seedy, one word you would never associate with THE STRANGLers is "poignant".
IT'S a sobering thought that 40 years have passed since The Stranglers first brought us their own heavier, edgier and more cerebral brand of punk.