Strangle

Is there possibility to construct a strangle using in the money put and in the money call?

Yes.

Draw a picture.

So, in terms of initial cost:

Strangle with OTM option < Straddle < Strangle with ITM option

In terms of expected payoff:

Strangle with OTM option > Straddle > Strangle with ITM option

Right?

no

Wonder why so many questions on strangle. The curriculum barely mentions strangle - only in a single line.

A straddle is just a set of long ATM call and puts because you’re unsure if the underlying will pop up or pop down…

The strangle is the same thing but using OTM calls and puts, keeps your debit small but then requires a bigger pop.

Alternatively, you can use one leg with OTM and one leg ATM which is unbalanced but may suit the investor view.

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Or you can use an ITM call and an ITM put.

Practically, in the industry, I have rarely seen such a definition being used.

It’s not a definition; it’s an approach.

A stupid approach, in my opinion, but certainly a possible one.

She asked if it were possible, not if it were practical, and not if it were intelligent.