Long Strangle

Strangles cost less than straddles because you're buying OTM options instead of ATM. This means lower capital at risk. However, you need a larger move to profit. Choose strangles when you want to reduce cost, and straddles when you want narrower breakevens.

No, your maximum loss is limited to the total premium paid. This is a defined-risk strategy. If both options expire worthless, you lose only what you paid - nothing more.

The underlying must move beyond your breakeven points. Calculate: Upper BE = Call Strike + Total Premium, Lower BE = Put Strike - Total Premium. Any move beyond these points generates profit.

You still lose, but not everything. If the underlying moves toward one of your strikes but doesn't reach the breakeven, you'll recover some premium from the in-the-money option, reducing your loss.

Closer strikes (2-3% OTM) cost more but have higher probability of profit. Further strikes (5-7% OTM) cost less but need bigger moves. Match your strike selection to your conviction about move magnitude.

IV crush (volatility dropping after an event) hurts Long Strangles because you're long vega. Even if the underlying moves, the drop in IV can offset your gains. Either exit before the event (capture IV rise) or ensure the move is large enough to overcome the crush.

It depends on your thesis. If one leg is 100%+ profitable, you could: (1) Close entire position to lock in profit, (2) Close winning leg and hold losing leg as cheap lottery ticket, or (3) Roll winning leg to capture more upside. Most often, closing the entire position is simplest.

Set a time exit (14-21 DTE) and value-based stop (50% loss). If you hit either without significant underlying movement, close to preserve capital. Don't hope for last-minute moves - theta accelerates near expiration.

Strangles use OTM options which have lower gamma. This means profits build more slowly as the underlying moves. More time gives the underlying more opportunity to make the larger move needed to reach your wider breakevens.

Yes, through IV expansion (vega profit). If uncertainty increases and IV rises, both options gain value even without significant underlying movement. You can close the strangle at a profit from the IV increase alone.

Gamma scalping involves trading the underlying against your delta. When underlying rises (delta becomes positive), sell some underlying. When it falls (delta becomes negative), buy some. This locks in gamma profits during oscillations. However, transaction costs and theta decay must be covered by scalping profits.

Compare IV at your target strikes to ATM IV. If put skew is steep (OTM puts have much higher IV), consider moving put strike slightly further OTM where skew flattens. Look for strikes that are relatively underpriced on the volatility surface.

Roll if: original thesis still valid, roll costs are reasonable, time extension meaningfully improves probability. Close if: thesis is broken, roll costs give up too much profit, better opportunities exist elsewhere. Generally, if rolling costs more than 20% of original premium, prefer closing.

Size the strangle so put profit in your crash scenario offsets acceptable portfolio loss. For a £100,000 UK equity portfolio, if you want protection against 15% crash (£15,000 loss), size your FTSE strangle so the put profit at -15% FTSE roughly equals £15,000.

For known events (BoE, earnings): 7-14 days past the event. For technical breakouts: 45-60 days to allow time for pattern resolution. For general volatility plays: 60-90 days for maximum time exposure. Shorter DTE = more theta risk, longer DTE = more capital tied up.