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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 ?
"She confessed to strangling the child and dumping the body at the dumpsite where she worked as a house help for a few days," DCI tweeted on Sunday.
Meanwhile, during interrogation one of the brothers admitted to murdering his sister by strangling her.
The Public Prosecution accused him of sexually harassing the maid in the car and strangling her to death with her hijab when she threatened to report his deed to her sponsor.
AN horrific strangling is the kick-off point for another episode of Taggart (ITV1, Monday).
A musician allegedly fulfilled a macabre sex fantasy by strangling a school teacher and then sexually abusing her body, a court heard.
A 32-year-old mother was arrested Monday by police on a charge of strangling her 3-month-old son.
AN electrician committed suicide after strangling his girlfriend in a violent row, a coroner ruled yesterday.
Police chief Joshua Tampubolon said the victim had been swimming with three friends in the Tembung River when the python emerged to attack him, strangling and nearly swallowing him before villagers armed with spears forced it to flee.
A 55-year-old man was arrested Friday on suspicion of strangling his 19-year-old niece at her house in Yao, Osaka Prefecture, police said.
Short, balding mechanic Kyte, 35, was nicknamed the Midlands Ripper when he was jailed for life at Nottingham 12 days ago for strangling vice girls Samo Paull, 20, and 33-year-old Tracy Turner.
Gerard O'Hara, 32, admitting strangling his 24-year-old fiancee Lisa Doyle with his arm and a shoelace at the house they shared in Leighlinbridge, Co Carlow, on September 20 last year Detective Garda Brendan Murphy told the court yesterday O'Hara presented himself to gardai at Leighlinbridge station on the morning of September 20 in an agitated state.