Strangle vs. Straddle Option Trading Strategies » Day Trader Guide

Strangle vs. Straddle Option Trading Strategies


Strangle Option Strategy

In the Strangle Option you’ll be selling both the Call and Put Options which have identical expiry times, but different strike prices.

The downside to this kind of Binary Options trading strategy is that losing trades tend to be larger than the winning one. It’s very helpful to select expiry prices that are in-line with the limits you expect the price to stay within by the expiry of the current price.

Straddle Option Strategy

There is only one major difference between the long and short Straddle Option Strategy and the Strangle Option Strategy just described. Straddle Option Strategy Call and Put options, which are either bought and or sold, should have identical strike prices and the same expiration deadline.

  • Long Straddle

When the expiry time is far enough away in time to guarantee a profit on one of the existing options that is larger than the combined premium of the options, the combined expiry should land ‘In the Money’.

  • Short Straddle

It can be even riskier than the Short Strangle Strategy because within this timeframe there is no flexibility margin for prices beyond the value of option premiums.

Applying the Strategies

In order to start gaining profit, today’s day trader should probably begin to identify currency pairs that contain a strong resistance overhead as well as a strong resistance beneath. Investors will also need to find the price in between the two in order to have a normal daily range. This is a rational approach to wealth building.

The Short Strangle Option, when used properly by using a strike price just beyond the support and resistance levels, could lead to very healthy profits. On the other hand, if the price is reaching the point of a uniting triangle, where it appears that it will have to break out, then a Long Strangle or Straddle may be implemented. If there appears there will be a breakout in the triangle to one side, you will be able to adjust the strike price as a result of the new configuration.

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