Sunday
Jan012006
What's a Strangle? (Option Strangle)
January 1, 2006 at 6:34 PM
stranĀ·gle (strnggl)
v.
To compress the trachea so as to prevent sufficient passage of air; suffocate.
An options strangle is:
A Strangle is the purchase of a put and a call, in which the options have the same expiration and the put strike is lower than the call strike, called a long strangle. Also the sale of a put and a call, in which the options have the same expiration and the put strike is lower than the call strike, called a short strangle.
If both options have the same strike price, it's called a straddle.
With both straddles and strangles you don't care which direction the market moves. You are just betting that it moves faster than the options lose time value. If you are short straddles or strangles you earn the decay and hope the market doesn't move.
Other Option Education Resources:
CME Glossary
My Favorite: Yahoo Options Education
Investor Words Strangle
English Dictionairy Definition:
stranĀ·gle (strnggl)
v.
To compress the trachea so as to prevent sufficient passage of air; suffocate.
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