5.2.2. Strangles
A strangle is a variant of the straddle in which both a call and a put are purchased or sold on the same underlying asset or futures contract and with the same expiration date. Unlike a straddle, however, the two legs of a strangle have different strike prices. Both the call and put are purchased or sold out of the money, and the call strike is above the put strike. The purchase of a call and put at the different strike prices is called a long strangle. The sale of both a call and put at different strikes is called a short strangle.
Like a straddle, a strangle attracts investors according to their expectations about the volatility of futures price. If an investor expects wild fluctuations in either direction, she may buy a long strangle. The distinction of a long strangle is that its out of the money puts and calls are cheaper to buy than a straddle, and an even greater volatility is required to realize a profit.