Buy an OTM put and OTM call — cheaper than a straddle, needs a bigger move to profit.
| Parameter | Default | Description |
|---|---|---|
| put_strike_pct | 0.95 | Put strike (5% OTM) |
| call_strike_pct | 1.05 | Call strike (5% OTM) |
| dte | 45 | Days to expiration |
A long strangle buys an OTM put (95% of spot) and an OTM call (105% of spot). It is cheaper than a straddle but requires a larger underlying move to profit. Like the straddle, it is a volatility bet that wins when realised volatility exceeds implied. The wider strikes reduce the debit but widen the breakeven range. Backtested with 45 DTE cycles.
# Long Strangle: buy OTM put + buy OTM call
for entry in monthly_entries:
S = spot_at_entry
K_put = round(S * 0.95 / 5) * 5 # 5% OTM put
K_call = round(S * 1.05 / 5) * 5 # 5% OTM call
T = 45 / 365.25
prem_put = black_scholes_put(S, K_put, T, r, sigma)
prem_call = black_scholes_call(S, K_call, T, r, sigma)
debit = prem_put + prem_call
S_exp = spot_at_expiry
payoff = max(0, K_put - S_exp) + max(0, S_exp - K_call)
pnl = payoff - debit
pnl_pct = pnl / debit * 100| Symbol | Return % | Sharpe | Max DD % | Win % | Avg/trade % | Trades |
|---|---|---|---|---|---|---|
| SPY | +9144.5% | 0.39 | +500.0% | +31.6% | +481.3% | 19 |
| QQQ | +22028.3% | 0.45 | +400.0% | +47.4% | +1159.4% | 19 |
| IWM | +17376.7% | 0.71 | +256.5% | +68.4% | +914.6% | 19 |
| DIA | +1897.8% | 0.27 | +500.0% | +31.6% | +99.9% | 19 |
| Avg | +12611.8% | 0.46 | +414.1% | +44.7% | — | 19 |