strangle investment & finance definition

A trading strategy that involves the simultaneous purchase and sale of options (called a straddle), in which the two parts of the trade do not have a common strike price. A long strangle strategy is used to profit from a volatile price scenario, while a short strangle strategy is used when the investor believes prices will be stable. Typically, short strangles are more popular than long strangles, because the short strangle is used to take advantage of the declining time value of options in markets where asset prices are expected to be constant.