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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 police informed the unidentified youth, appeared to be 16 to 18, had been strangled with a rope and mud was filled in his mouth.
'I strangled her and killed her and then I tried to strangle myself but I survived,' said Ali.
Summary: The uncle of a 12-year-old girl who was strangled and stabbed to death has been charged with her murder, police have said.
VILLAGERS have blocked access to river tunnels as they hunt for a python which strangled a boy to death on Sumatra island more than a week ago, Indonesian police said yesterday.
PAKISTAN cricket coach Bob Woolmer was poisoned before being strangled, apparently rendering him unable to fight back, a BBC 1 programme says tonight.
It will come as no surprise to regular viewers when someone else is strangled in the same way and the team begin a hunt for a serial killer.
A Middlesbrough mum was strangled to death by her jealous lover in front of her young daughter at their home in France.
A nursery worker found dead at her Birmingham home was probably strangled by someone she knew, police revealed last night.
TRADERS have been warned not to stock children's yo-yo balls after a child was nearly strangled with one.
A woman was strangled Monday in an apartment house in Takikawa, Hokkaido, whose occupant was listed in critical condition after he tried committing suicide, police said.
OKARA -- Three accused strangled to death an elderly woman over resistance during a robbery.
MIRPURKHAS -- Three suspects were picked up in police raids carried out after a man was found strangled in Karam Ali Shar village within the limits of the Phuladyoon police station on Tuesday.