When to Use Strangle Options: The Volatility Bet That Works Both Ways

Ever heard traders say “it could go either way”? Most people dismiss that as uncertainty. But strangle options traders? They turn that indecision into profit. Here’s how.

The Core Idea Behind Strangle Options

A strangle isn’t complicated. You buy (or sell) both a call and a put option on the same asset, same expiration date, but at different strike prices. The magic is that you win if the price moves big enough in either direction. Unsure whether Bitcoin will pump or dump? Strangle options let you bet on volatility itself rather than direction.

Why Traders Are Moving Toward This Approach

The real appeal of strangle options lies in their flexibility. Traditional traders need to pick a side — bullish or bearish. But volatility traders don’t. If you know something big is coming (an ETF decision, a major network upgrade, Fed announcements), you can position yourself to profit from the chaos, regardless of which way prices swing.

Since OTM (out-of-the-money) options are cheaper than their in-the-money counterparts, strangle options also require less upfront capital. You can allocate resources more efficiently and leverage bigger positions without breaking the bank.

The Critical Factor: Implied Volatility (IV)

Here’s what separates strangle options professionals from amateurs: understanding IV. Implied volatility measures expected price swings. High IV means big moves are priced into options contracts. Low IV? Your strangle options strategy becomes expensive relative to the actual move that happens.

The best window for strangle options trades opens right before catalysts — just before the market realizes what’s about to happen. Once the event occurs and IV drops, your position can deteriorate quickly.

Long Strangle vs. Short Strangle: Where’s Your Edge?

Long strangles (buying both calls and puts): You’re betting on massive movement. Using Bitcoin at $34,000 as an example, if you bought a $30,000 put and $37,000 call expiring in 24 days, you’d risk about $1,320 in premiums for potentially unlimited upside. The trade works if Bitcoin spikes above $37,000 or crashes below $30,000.

Short strangles (selling both calls and puts): You’re betting prices stay contained. Sell those same contracts and collect the $1,320 premium as profit — but you’re now exposed to unlimited losses if Bitcoin explodes past your strike prices. This approach only works if you’re confident prices will stagnate.

The Real Risks Nobody Mentions

Strangle options are unforgiving for timing mistakes. Theta decay works against you constantly — each day that passes without a big move eats into your position. Miss the catalyst or get the timing wrong? You can lose most of your premium overnight.

Short strangles carry asymmetric risk. You cap your profits at the premium collected but face unlimited losses. Long strangles are safer but require the asset to move significantly just to break even.

Strangles vs. Straddles: Know the Difference

Both let you profit from volatility without predicting direction. The difference? Straddles buy/sell at the same strike price and typically cost more. They need smaller moves to profit. Strangles use different strikes, cost less, but demand bigger moves. Your capital and risk tolerance should determine which fits your portfolio.

The Bottom Line

Strangle options work best when:

• You expect significant volatility from an upcoming event
• You want exposure without directional bias
• IV is elevated but not yet peaked
• You’ve sized your position appropriately for the risk

The traders winning with strangle options aren’t guessing directions — they’re reading market structure and positioning ahead of known catalysts. That’s the real edge.