Business and Personal Finance Dictionary

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• STRANGLE
  
  A strangle is an options-buying strategy in which you buy an equal number of put options (to sell) and call options (to buy) on the same underlying stock, stock index, or commodities futures contract at different strike prices that are equally out of the money-that is, equally farabove and below the current market price of the underlying investment. A strangle is essentially a bet that the stock will be valued between these two strike prices so you can exercise your options before they expire, realizing a greater profit on one of them than you lose on the other. For example, if a stock is selling at $100 a share, you might strangle it by buying call options at a higher strike price (say $110 a share) and put options at a lower strike price (say $90 a share). If the value of the underlying investment moves dramatically toward either strike price, you stand to benefit. If not, the strategy has not paid off. A strangle costs less than a straddle, but because both options are out of the money, the likelihood of making a profit is also smaller.
  
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