How Do You Spell STANGLE?

1. Stangle is a term derived from the combination of "strangle" and "angle." It refers to a financial investment strategy that involves the purchase or acquisition of both long and short options on the same underlying security with the same expiration date, but at different strike prices. The primary objective of employing a strangle strategy is to profit from significant price movements or volatility in the underlying security, regardless of whether it moves up or down.

   In a strangle position, the investor buys an out-of-the-money put option (a contract granting the right to sell the underlying security at a predetermined price) and an out-of-the-money call option (a contract granting the right to buy the underlying security at a predetermined price). By doing so, the investor creates a wide profit zone with the hope of capitalizing on any substantial movement in the underlying security's price.

   This strategy is often used in markets where the investor anticipates a significant event or announcement that may cause a sharp price movement in the underlying security. By employing a strangle, the investor can potentially benefit from the unpredictability of the market and profit from the stock's movement outside of the narrow band created by the strike prices of the options bought. However, it should be noted that strangle strategies also involve high risks, as they require significant price volatility to be profitable and can result in total loss if the underlying security fails to move significantly in either direction.

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