Strangle (also in German)

A transaction in which the same number of put options and call options with the same expiration date are sold or bought on the same underlying. However, the strike price of the call is higher than that of the put; the market participant therefore expects a price increase for the underlying asset (reference base: financial product, commodity). – A combination of an out-of-the-money call option and an out-of-the-money put option, both of which are held by one trading party. As in the case of risk reversal, both options expire on the same date and are denominated in strike prices whose percentage distance from the forward price is the same at the time the contract is concluded (buying or selling an out-of-the-money put option and call option on the same underlying asset, with the same expiration; profits are made only if there is a drastic change in the price of the underlying asset). – The (exchange) quotation of the Strangle on foreign exchange markets is often interpreted as an indication of approaching exchange rate movements. – See butterfly spread, option, risk reversal, straddle, strap, strip. – Cf. Monthly Report of the Deutsche Bundesbank, October 2001, pp. 34 ff.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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