Real Example (July 2025)
A long strangle involves buying a call and a put with different strike prices but the same expiration. It's ideal for traders expecting a big move but uncertain of the direction.
- Stock: XYZ Corp
- Outlook: Expecting significant volatility
- Setup: Buy 1 XYZ $105 Call @ $2.50; Buy 1 XYZ $95 Put @ $2.00
- Total Cost: $4.50 ($450 per contract)
- Max Loss: $450
- Max Gain: Unlimited (upside) or substantial (downside)
- Breakeven: $109.50 (upside) and $90.50 (downside)