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strangle strategy

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Financial Dictionary

strangle strategy

The strategy of selling both an out-of-the-money call and an out-of-the-money put. Profits are greatest when relatively small price movements occur in the underlying asset and neither option is exercised. In case the value of the underlying asset moves in one direction, the loss on one side of the spread is at least partially offset by a gain on the other side.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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