Long Strangle

Volatility

Buy an OTM put and OTM call — cheaper than a straddle, needs a bigger move to profit.

Performance across all datasets

Symbol	Return %	Sharpe	Max DD %	Win %	Avg/trade %	Trades
SPY	-1376.6%	-1.79	+1276.6%	+10.5%	-72.5%	19
QQQ	-1227.0%	-1.40	+1127.0%	+10.5%	-64.6%	19
IWM	-1197.9%	-1.41	+1097.9%	+15.8%	-63.0%	19
DIA	-1466.3%	-1.74	+1382.3%	+10.5%	-77.2%	19
Avg	-1317.0%	-1.58	+1221.0%	+11.8%	—	19

Cumulative P&L % — all symbols

Detail:

Cumulative P&L % — SPY

Risk Profile

Max Profit

Unlimited (call side) / K_put − Debit (put side)

Max Loss

Total debit paid

Breakeven

K_put − Debit or K_call + Debit

Outlook

High volatility expected (direction agnostic)

Parameters

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

Methodology

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.

Implementation

# 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