The strangle strategy: a cheaper bet on a big move
An out-of-the-money call and put. Lower cost than a straddle, with a wider gap to cross.
By the EzyOptions Team · Updated 2026-10-15
What a strangle is
A long strangle buys an out-of-the-money call above the index and an out-of-the-money put below it, for the same expiry. Like the straddle, it does not pick a direction. Unlike the straddle, both legs start with no intrinsic value, so the position is cheaper to open and needs a bigger move before it pays.
Straddle or strangle
The choice is a trade between cost and distance. The straddle costs more and starts making money sooner; the strangle costs less and needs the index to travel past a strike before either leg has any intrinsic value. If the move never comes, the strangle loses less. If it comes and stops short, the strangle can expire worthless where a straddle would have recovered part of its cost.
| Aspect | Straddle | Strangle |
|---|---|---|
| Strikes | One, usually at the money | Two, both out of the money |
| Cost | 350 points | 175 points |
| Breakevens at expiry | 23,650 and 24,350 | 23,625 and 24,375 |
| If the index does not move | Loses the whole, larger premium | Loses the whole, smaller premium |
| Maximum loss | The premium paid | The premium paid |
Choosing the width
The strangle has a decision the straddle does not: how far out of the money to put the two legs. A wider strangle costs less and loses less if nothing happens, but its breakevens sit further away, so the index has to travel further before the position makes anything. Many traders pick the strikes by distance from the index, others by an option's delta, which is a rough guide to how likely a strike is to finish in the money.
| Width | Strikes | Cost per lot | Breakevens | Move needed to break even |
|---|---|---|---|---|
| Narrow, 100 points out | 23,900 put, 24,100 call | 255 points, 16,575 rupees | 23,645 and 24,355 | 355 points up (1.5%) or 355 down (1.5%) |
| The worked example, 200 out | 23,800 put, 24,200 call | 175 points, 11,375 rupees | 23,625 and 24,375 | 375 points up (1.6%) or 375 down (1.6%) |
| Wide, 400 points out | 23,600 put, 24,400 call | 78 points, 5,070 rupees | 23,522 and 24,478 | 478 points up (2.0%) or 478 down (2.0%) |
Against the move the market expects
A common rule of thumb reads the price of the at-the-money straddle as the move the market expects by expiry. In the straddle guide that straddle costs 350 points, so the market is pricing roughly a 350-point move either way. The strangle in the worked example below breaks even 375 points from 24,000, 25 points beyond that priced move. It is cheaper precisely because it needs the index to do more than the market already expects.
The same check works on any session: compare the strangle's breakevens with the at-the-money straddle on the option chain, or with the expected move worked out from implied volatility.
What works against it
The same two forces as any long-premium position. Theta drains both legs daily, and out-of-the-money options are almost all time value, so the decay is a large share of what was paid. Vega cuts both ways: a rise in implied volatility helps even before the index moves, and a fall after an event can erase the position's value quickly.
The short strangle
Selling the two legs collects a smaller credit than a short straddle but leaves a wider band in which the seller keeps all of it. It is one of the most commonly sold positions on index options, and its loss side is still open-ended beyond either breakeven. The iron condor is the same idea with that open end capped.
A worked example
NIFTY at 24,000, one lot of 65 on each leg. Premiums are illustrative, chosen to be round, not quotes from any session.
- Buy the 24,200 call at 90
- Buy the 23,800 put at 85
- Net premium: a debit of 175 points, or 11,375 rupees per lot.
- Breakevens: 23,625 and 24,375 at expiry.
- Maximum profit: open-ended: it keeps growing the further the index moves past a breakeven.
- Maximum loss: 175 points, or 11,375 rupees per lot.
| NIFTY at expiry | Points | Rupees per lot |
|---|---|---|
| 23,400 | +225 | +14,625 |
| 23,625 | 0 | 0 |
| 23,800 | -175 | -11,375 |
| 24,000 | -175 | -11,375 |
| 24,200 | -175 | -11,375 |
| 24,375 | 0 | 0 |
| 24,600 | +225 | +14,625 |
Charges, taxes and slippage come off every line of that table. The strategy builder draws the same payoff as a curve with live premiums, so you can move a strike and watch every number above change, and the Session Analysis replays a position like this through a recorded NIFTY session.
Strangle: common questions
What is the difference between a straddle and a strangle?
A straddle buys a call and a put at the same strike, usually at the money. A strangle buys them at two different out-of-the-money strikes. The strangle is cheaper to open but needs a larger move before it profits.
How do you calculate strangle breakevens?
Add the total premium to the call strike for the upper breakeven, and subtract it from the put strike for the lower one. With a 24,200 call, a 23,800 put and 175 points paid in total, the breakevens at expiry are 24,375 and 23,625.
Is a short strangle safe?
It has a high chance of keeping some premium when markets are quiet, but its loss is open-ended if the index moves sharply past either breakeven, and it requires substantial margin. Many traders buy further out-of-the-money options to cap that risk, which turns it into an iron condor.
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Educational content only: not investment advice. You are responsible for your own trading decisions.