Strategy Options Trading – strangle

Strangle

There is a very wide variety of strategies to work with binary options. This diversity allows almost all investors build a combination that will provide him it was his realization of specific goals. At the same time offered and complex combinations and even very simple.

 For example, a fairly simple combination: you can buy options “call” and have earnings on climbing asset prices.

There is a strategy called “strangle”. This strategy allowed the markets of Finance official. This strategy provides an opportunity for the identical asset base and terms that match the use of two types of options. For example, you can use both options “call” and “put”.However, their strikes may be different. Name of strategy comes from the English word Strangle . Strangle sounds much less aggressive and harmless than if you use a direct translation. When directly translated title will sound pretty aggressively – “choke” or “push”. But, despite sounding names, the strategy does allow a good profit, for some developing circumstances.

Most often, the implementation strangle purchase will depend on the forecasts for the market asset. Strangle based (built) based on stock options “out of the money”, translated to English.

It is advisable to buy a strangle when the expected price movement of the underlying assets. As a rule, the movement should be significant and will not depend on the direction. Make a purchase strangle means opening a long position for the option “call” or “put”, which strikes different. The strategy is designed to generate profits on the rise in prices for the underlying assets or profits on the price reduction. Once the price will go beyond certain limits costed corridor strategy will work successfully. If the forecast is wrong, your loss will be only in the amount of premiums that were paid for the options. Sale strangle involves opening the contrary, the short option positions. Prices of their performance will be different. This suggests that the orientation focused on the change in the price, but insignificant. In other words, by changing prices in a certain range, which is fixed. When the forecast is correct, the option simply expires and this will make a profit without being exercised. When the forecast is wrong, then this would entail exercise of the option, that would mean a loss.

 Similar to this strategy, strangle strategy. When strangle strategy, purchasing options provided with the same strike price. These two strategies have both advantages and disadvantages. Cost equals the cost of one strangle several strangle. In other words, the implementation will strangle cheaper. But keep in mind that this and profit from strangle bude also lower. But when selling a straddle profits will be generated in the corridor, it would be more narrow.

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