Straddle vs Strangle
Master the differences between straddles and strangles to profit from big moves without predicting direction.
What is This comparison?
This comparison Straddles and strangles are volatility strategies that profit from large price movements in either direction, commonly used around earnings and events.
The key difference is cost vs. probability: straddles cost more but require less movement; strangles cost less but need bigger moves to profit.
Quick Comparison
| Feature | Long Straddle | Long Strangle |
|---|---|---|
| Max Profit | Unlimited | Unlimited |
| Max Loss | Total premium paid | Total premium paid |
| Break Even | Strike +/- total premium | Two points (further apart than straddle) |
| Best For | Big move expected, direction unknown | Huge move expected, cheaper entry |
| Win Rate | 30-40% | 25-35% |
| Complexity | Beginner-Intermediate | Beginner-Intermediate |
| Capital Required | $500-2,000 | $200-1,000 |
Feature-by-Feature Comparison
When to Use Long Straddle
Use long straddles when you expect a significant move but IV is moderate. The higher cost gives you closer break-even points and higher probability of profit.
Learn Long StraddleWhen to Use Long Strangle
Use long strangles when you expect a massive move and want to reduce cost. Best for high IV situations where you need the stock to move more anyway.
Learn Long StrangleThe Implied Move Rule
Before buying either strategy, calculate the implied move: Straddle Price / Stock Price = Expected % Move. You need the stock to move MORE than this to profit.
Frequently Asked Questions
What is the difference between a straddle and strangle?
A straddle uses ATM options (same strike for put and call), while a strangle uses OTM options (different strikes). Straddles cost more but have closer break-even points. Strangles cost less but require bigger moves to profit.
Should I buy a straddle or strangle before earnings?
It depends on IV levels and expected move. Straddles work better when IV is moderate and you expect the move to exceed the implied move. Strangles are better when IV is extremely high and you're paying less premium but expecting a larger percentage move.
Related Strategies
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