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When to buy and sell strangle in forex?

When to buy and sell strangle in forex?

Getting into the Forex market can be a very daunting task. But luckily there are loads of strategies that can help even the most novice of traders. The strangle strategy is precisely one of those strategies that can help any trader make great trading decisions.

What is a strangle?

A strangle is an options strategy that involves purchasing both a call and a put with different strike prices and expiration dates. The goal of a strangle is to take advantage of price movement in either direction, as long as it’s not too much in one direction.

When to buy a strangle

There are two main times when you might want to buy a strangle: when you expect the market to move, but you’re not sure which direction it will go, or when you think the market has already started moving in one direction and you want to profit from that movement.

For example, let’s say you think the market will go up, but you’re unsure how much. You could buy a call and a put with different strike prices, giving you the option to profit regardless of the market’s direction.

Or, let’s say you think the market is starting to move down, but you’re not sure how far it will go. You could buy a put and a call with different expiration dates, again giving you the option to profit from whichever direction the market moves.

When to sell a strangle

You might want to sell a strangle if you think the market is about to move in one direction, but you’re not sure which way it will go. For example, if you think the market will go up but don’t think it will go up very much, you could sell a call and a put with the same strike price. It would give you the option to profit if the market goes up and lose money if it goes down.

You might want to sell a strangle if you think the market is starting to move in one direction, but you don’t think it will go too far. For example, if you think the market will go down but you don’t think it will go too far, you could sell a put and a call with the same expiration date. It would give you the option to profit if the market goes down and lose money if it goes up.

When NOT to buy or sell a strangle

There are a few times when you shouldn’t buy or sell a strangle. For example, if you think the market is about to move in one direction but you’re unsure which way it will go, you might be better off buying or selling a straight call or put. It would give you the option to profit from whichever direction the market moves without worrying whether the market goes far in that direction.

Similarly, if you think the market has already started moving in one direction and want to profit from that movement, you might be better off buying or selling a straddle instead of a strangle. A straddle involves buying both a call and a put with the same strike price and expiration date, which gives you the option to profit whether the market goes up or down.

In short

There are a few things to keep in mind when deciding whether or not to buy or sell a strangle.

  • You should only buy or sell a strangle if you think the market is going to move, but you’re not sure which direction it will go
  • You should only buy or sell a strangle if you think the market has already started moving in one direction and you want to profit from that movement
  • You should not buy or sell a strangle if you think the market is about to move in one direction but you’re not sure which way it will go
  • You should not buy or sell a strangle if you think the market has already started moving in one direction and you want to profit. Instead, it would help if you bought or sold a straddle.

 

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