Binary options trading strategy "Strangle

The trading strategy "Strangle" (Strangle) is one of the simplest and most popular trading strategies binary options on Anyoption, which is based on the expectation of changes in volatility. Since here the trader buys "call" and "put" options with the same expiration date. But with different strike prices. Using this strategy, the trader expects a sharp increase or decrease in the value of the selected financial instrument. It does not matter in what direction, the more the better.

In order to start, it is necessary for the selected financial instrument:

  • to purchase a call option out of the money
  • to purchase a put option out of the money, with a strike price different from the strike price of a call option

Many brokers currently present in the binary options market allow you to purchase both options with one order, that is, at the same time.

This is what the strategy looks like on the chart:

Binary options trading strategy "Strangle
Binary options trading strategy "Strangle

Deciphering abbreviations:

  • CI Put - the strike price of the purchased Put option
  • CI Call - the strike price of the purchased call option
  • Lower TB - breakeven point
  • Top TB - upper break-even point

As with any strategy, in addition to potential profits, there are also potential losses. As stated above, the strategy will make a profit if the selected financial instrument experiences a strong increase volatilitythat is, a strong change in the price of the underlying asset.

If the price does not change much over the selected time period and remains between the strike prices of both options, then the strategy will make a loss in the amount of option premiums from both options. Therefore This strategy is used in the case ofIf you see that for a particular financial instrument for a long time there is no volatility, because after a period of stagnation (pause) the price tend to change sharply, you can also apply a strategy to financial instruments, which have during the trading day volatility is high.

Possible profits and losses in the binary options trading strategy "Strangle" can be defined as follows:

  • maximum profit: absolutely unlimited
  • maximum risk: the premium on both "call" and "put" options
  • upper breakeven point: maximum risk + exercise price of the call option
  • lower breakeven point: the strike price of the put option minus the maximum risk

Pros and cons of this strategy


  • you get a profit no matter which way the price of the asset goes
  • you limit your risk
  • margin requirements are equal to the maximum risk


  • you will make a profit with this strategy only if the price of the underlying asset changes a lot

To exclude this negative factor, experts ForTrader recommend choosing options on those financial instruments that have the highest liquidityThe trading session is a good opportunity to analyze the volatility or the expected increased volatility, for example, before the release of important news. To do this, do a little analysis and look at how certain news influenced your chosen financial instrument in the past. Pay attention to the maximum and minimum prices in the past six months. This will help you determine not only the period of increased volatility, but also the direction of the price.

Other strategies for trading binary options

Leave a Reply

Back to top button