A long strangle is an options strategy in which the investor simultaneously buys an Out-of-the-Money (OTM) call option and an OTM put option on the same underlying asset, with the same expiry date but different strike prices — the call strike above the current market price and the put strike below it. The strategy profits when the underlying makes a significant move in either direction — large enough to exceed the total premium paid for both options. Because both options are OTM, the long strangle is cheaper than a long straddle (which uses ATM strikes), but requires a larger price move to become profitable. The maximum loss is limited to the net premium paid, while the profit potential is theoretically unlimited on the upside and substantial on the downside. In Indian F&O markets, long strangles on Nifty 50 and Bank Nifty are popular ahead of high-uncertainty events such as RBI policy meetings, Union Budget announcements, and general election results — where a large price move is expected but the direction is uncertain.
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