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OptionsMath

Long Strangle Calculator

Long strangle profit or loss equals the maximum of stock price minus call strike or zero, plus the maximum of put strike minus stock price or zero, minus call premium and put premium, times 100 shares times number of contracts.

Expiration scenarios

Solution

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Long Strangle Formula

Total premium creates two break-even prices: put strike minus debit and call strike plus debit.

Worked Examples

Load these long strangle examples to compare upside breakouts, downside shocks, and max-loss no-move finishes.

UPSIDE BREAKOUT

How does a strangle profit from a rally?

A trader buys a $48 put for $1.20 and a $55 call for $1.60. The stock finishes at $60.

  • Net debit = $1.20 + $1.60 = $2.80.
  • Upper break-even = $55 + $2.80 = $57.80.
  • Call value = ($60 - $55) x 100 = $500.
  • Profit = $500 - $280 = $220.

Result: the long strangle earns $220.00.

The stock had to clear the call strike and the total debit before profit appeared.

NO MOVE

What if both options expire worthless?

A trader buys 3 strangles with $90 puts for $2 and $110 calls for $2.25. The stock finishes at $100.

  • The stock finishes between the strikes.
  • Both options expire out of the money.
  • Net debit = ($2 + $2.25) x 100 x 3 = $1,275.
  • Net loss = $1,275.

Result: the position loses the full $1,275.00 debit.

This is the maximum expiration loss for a long strangle.

DOWNSIDE SHOCK

How does a strangle profit from a selloff?

A trader buys a $190 put for $7 and a $220 call for $6. The stock falls to $170.

  • Net debit = $13 per share.
  • Lower break-even = $190 - $13 = $177.
  • Put value = ($190 - $170) x 100 = $2,000.
  • Profit = $2,000 - $1,300 = $700.

Result: the long strangle earns $700.00 on the downside move.

Deep downside gains are capped by the stock's zero floor.

How It Works

A long strangle buys an out-of-the-money put and an out-of-the-money call with the same expiration. It usually costs less than a straddle, but it needs a larger move to overcome the distance between strikes plus the total premium paid.

Example Problem

You buy a $95 put for $3 and a $105 call for $3.50. The stock finishes at $114. What is the strangle profit or loss?

  1. Net debit = $3 + $3.50 = $6.50 per share.
  2. Call value = max($114 - $105, 0) x 100 = $900.
  3. Put value = $0 because the stock is above the put strike.
  4. Net P/L = $900 - $650 = $250 profit.
  5. Lower break-even = $95 - $6.50 = $88.50.
  6. Upper break-even = $105 + $6.50 = $111.50.

The stock must move outside one of the break-even prices for the long strangle to profit at expiration.

Key Concepts

A long strangle is a volatility trade with two different strikes. Maximum loss is the total debit paid if the stock finishes between the strikes. Upside profit is unlimited, while downside profit is capped by the put strike minus premium.

Applications

  • Modeling event trades where a large move is expected.
  • Comparing cheaper out-of-the-money options against a straddle.
  • Finding upper and lower break-even prices.
  • Estimating risk when direction is uncertain.

Common Mistakes

  • Assuming a strangle needs the same move as a straddle.
  • Forgetting to include both premiums in break-even calculations.
  • Choosing strikes so far away that break-even becomes unrealistic.
  • Using expiration payoff to predict live option value before expiration.

Frequently Asked Questions

What is a long strangle?

A long strangle is a long put at a lower strike and a long call at a higher strike. Both options usually share the same expiration.

How do I calculate strangle break-evens?

Add the call and put premiums. Lower break-even equals put strike minus total premium, and upper break-even equals call strike plus total premium.

What is the maximum loss on a long strangle?

Maximum loss is the total premium paid. It occurs when both options expire out of the money between the strikes.

Is a strangle cheaper than a straddle?

Often yes, because both options are typically out of the money. The tradeoff is that the stock must move farther to reach break-even.

Does this calculator include volatility changes before expiration?

No. It models expiration payoff only and does not estimate live option prices before expiration.

Reference: Options Industry Council, Long Strangle strategy description and expiration payoff definitions.

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