Regardless of the strategy you are going to use we have made the signals as easy as possible so that the new and experienced traders can both take advantage of our alerts and trade them profitably.

Finding a profitable straddle or strangle play takes skills, knowledge, and a deep understanding of how options are priced.

With both straddle and strangle, you make a profit if the stock moves in one direction or the other. It means both the bull and the bear positions are covered . Either the call options will be profitable and the put expires worthless (or you sell them for a loss), or the put will be profitable and the calls expire worthless (or you sell them for a loss) so only one leg of the option will be profitable while the other leg will not.

Straddle and Strangle strategies work best if an option has high implied volatility and has been consolidating for a while and is ready to move in one direction or the other. Consolidating patterns such as triangle pennants create explosive price movement and our job is to locate those patterns and get you in at a perfect entry point before the explosive move happens.

The long straddle strategy involves two steps:

1. Buying at-the-money (ATM) strike puts

2. Buying ATM strike calls with same expiration date.

Straddle is a trading position involving puts and calls on a one-to-one basis in which the puts and calls have the same strike price, expiration date and underlying stocks. See chart pattern samples below.

The long strangle strategy involves two steps:

1. Buying out-of-the-money (OTM) strike puts

2. Buying out-of-the-money strike calls with the same expiration date.

Strangle is a trading position involving puts and calls on a one-to-one basis in which the puts and calls have the same expiration date and underlying stocks and different strike price.

This will be a net debit transaction given the fact that you are paying for equal numbers of calls and puts. Because you are buying OTM options where there is no Intrinsic Value, the strangle is a cheaper alternative to the straddle. See chart pattern samples below:

Comparison Between the Strangle and the Straddle

The total maximum risk of the strangle is far less than that of straddle because the option contracts that you buy for strangle are out of the money and they cost you a lot less.

Both strategies offer an ultimate maximum reward, but the Straddle's risk profile is much steeper than the Strangle's.

The Strangle shows a greater percentage return because of its lower cost basis.

Samples:

1.  BIDU is breaking down and your put options will triple up and the call options expirers worthless. chart.

2. AAPL is also breaking down and the put options make 500% profit and the calls will expire worthless. chart.

3. FDG has exact same pattern and we bought it for our own account on Friday right before it broke down and sold the put contracts the following Monday for 450% profit for only 1 day hold. chart