Long Strangle

This is a volatility strategy consisting of a long position in an OTM call option with a strike price K1, and a long position in an OTM put option with a strike price K2 . This is a net debit trade. However, because both call and put options are OTM, this strategy is less costly to establish than a long straddle position. The flipside is that the movement in the stock price required to reach one of the break-even points is also more significant. The trader’s outlook is neutral. This is a capital gain strategy.