Option Trading Strategy №6: Buy Strangle

Strategy Description

Buying Strangle means simultaneously buying CALL and PUT options.

Strategy Assumption: The market will experience significant volatility, and the price will break through the selected strike price range.

Strategy Structure (Example)

Buy PUT: Strike Price 63, Premium 0.33

Buy CALL: Strike Price 72, Premium 0.33

Maximum Loss

If on the expiration date the price of CLZ8 does not fall below 63 and does not exceed 72,

the buyer's loss equals the total premium paid:

(0.33 + 0.33) × 1 × 1000 = 660 USD, where:

1 —— Contract Quantity

1000 —— Contract multiplier for crude oil futures CL

0.33 —— Premium per option

Break-even Point

Lower: 62 − (0.33 + 0.33) = 61.34

Upper: 72 + (0.33 + 0.33) = 72.66

Profit Characteristics

When the price breaks through the range 61.34–72.66,

buying Strangle begins to profit,

theoretical maximum profit is unlimited.