Strangles are similar in essence to straddles--the thing that changes is the type of strike we purchase or sell them at.
When buying a strangle, the investor buys a call at an OTM strike price (above the current price) and buys a put at an OTM strike price (below the current price). Here is the graph:
When price is above the call break even price or below the put break even price: Unlimited profit!
When price is not in the aforementioned range: Loss! The maximum loss is constant at all prices in this range and is equivalent to the total premium paid for both options.
Eighteen-year old trader, future connoisseur of options.
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