Long Strangle | PFG Futures

Long Strangle

Class: Precision

Synthetics: Long put A, Long call A. Long call A, long put B Long put A, Long put B Long instrument Long call A, Long call B, Short instrument

(All done to initial delta neutrality)

Long Strangle | PFG Futures

When to use:

If market is within or near A-B range and has been stagnant.

If market explodes either way, you make money; if market

continues to stagnate, you lose less than with a long


Profit Characteristics:

Profit open – ended in either direction. With put A vs. call

B version ( most common), break – even are at A minus

cost of spread. However, spread is usually not held to expiration.

Loss Characteristics:

loss limited most common version, loss is equal to net cost of

position. Maximum loss incurred if, at expiration, market is

between A and B.

Decay Characteristics:

Decay accelerates as options approach expiration but not

as rapidly as with long straddle. To avoid largest part of

decay, the position is normally taken off prior to expiration.

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