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| Long Combo | Long Strangle (Buy Strangle) | |
|---|---|---|
 |  | |
| About Strategy | A long Combo strategy is a Bullish Trading Strategy employed when a trader is expecting the price of a stock, he is holding to move up. It involves selling an OTM Put and buying an OTM Call. The strategy requires less capital as the cost of Call Option is covered by premium received from Put Option.
Say SBI shares are currently trading at Rs 500. You are bullish on it but doesn't want to invest or have capital to do it. You can use Long Combo strategy here by selling a Put option of SBI at strike price of Rs 400 and buying a Call Option at a strike price of Rs 600. You will earn premium on sell Put Option and pay premium on buying Call Option. you are investing less but will benefit if SBI shares rises as per your expectations. Read More | The Long Strangle (or Buy Strangle or Option Strangle) is a neutral strategy wherein Slightly OTM Put Options and Slightly OTM Call are bought simultaneously with same underlying asset and expiry date.
This strategy can be used when the trader expects that the underlying stock will experience significant volatility in the near term.
It is a limited risk and unlimited reward strategy. The maximum loss is the net premium paid while maximum profit is achieved when the underlying moves either significantly upwards or downwards at expiration.
The usual Long Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY Spot Price):
Options Strangle Orders
OrdersNIFTY Strike Price
Buy 1 Slightly OTM PutN Read More |
| Market View | Bullish | Neutral |
| Strategy Level | Advance | Beginners |
| Options Type | Call + Put | Call + Put |
| Number of Positions | 2 | 2 |
| Risk Profile | Unlimited | Limited |
| Reward Profile | Unlimited | Unlimited |
| Breakeven Point | Call Strike + Net Premium | two break-even points |
| Long Combo | Long Strangle (Buy Strangle) | |
|---|---|---|
| When to use? | Long Combo strategy should be deployed when you're Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it. | A Long Strangle is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. |
| Market View | Bullish When you are expecting the price of the underlying to move up in near future. | Neutral When you are unsure of the direction of the underlying but expecting high volatility in it. |
| Action |
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Suppose Nifty is currently at 10400 and you expect the price to move sharply but are unsure about the direction. In such a scenario, you can execute long strangle strategy by buying Nifty at 10600 and at 10800. The net premium paid will be your maximum loss while the profit will depend on how high or low the index moves. |
| Breakeven Point | Call Strike + Net Premium | two break-even points A Options Strangle strategy has two break-even points. Lower Breakeven Point = Strike Price of Put - Net Premium Upper Breakeven Point = Strike Price of Call + Net Premium |
| Long Combo | Long Strangle (Buy Strangle) | |
|---|---|---|
| Risks | Unlimited Long Combo is a high risk strategy. You will start losing money when the price of the underlying moves below the lower strike price. Your losses can be unlimited depending on how low the price of underlying falls. | Limited Max Loss = Net Premium Paid The maximum loss is limited to the net premium paid in the long strangle strategy. It occurs when the price of the underlying is trading between the strike price of Options. |
| Rewards | Unlimited Long Combo is a high return strategy. You will earn profits if the underlying moves above the higher price of the underlying. Your profit will depend on how high the price of the underlying moves. | Unlimited Maximum profit is achieved when the underlying moves significantly up and down at expiration. Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid Or Profit = Strike Price of Long Put - Price of Underlying - Net Premium Paid |
| Maximum Profit Scenario | Underlying goes up and Call option exercised | One Option exercised |
| Maximum Loss Scenario | Underlying goes down and Put option exercised | Both Option not exercised |
| Long Combo | Long Strangle (Buy Strangle) | |
|---|---|---|
| Advantages | Brings down the cost of investing in a Bullish stocks. And delivers high returns if prices move up. | |
| Disadvantage | Losses can be high if prices don't move as expected. | The strategy requires significant price movements in the underlying to gain profits. |
| Simillar Strategies | Long Straddle, Short Strangle |
| Compare |
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