Posted in
Education
By: Tom Gentile
on July 2nd, 2025
What to do if You Feel a Security can Move a Great Deal Higher or Lower
There are options strategies one can employ when they feel strongly a security will move in on direction higher or lower. But is there an option strategy available for when one does not know WHICH way the security will go, but they feel it will move a decent price amount one way or the other?
There most certainly is. In fact, I will teach you two strategies that are similar that give the opportunity to make money in the trade whether the stock moves higher or lower.
The two option strategies are the Straddle and the Strangle
Both option strategies look to capitalize on using a straddle or a strangle because of the expected price volatility. One is expecting a big price move int the security in either direction. With either of these two option strategies one does not need to predict which way it will go. One just needs it to GO!
The primary thing that hurts wither of these two strategies is little to NO price volatility, meaning the stock doesn’t move higher or lower strong enough to cover the cost of the trade and Time or Theta Decay just eats away at the premium paid potentially taking the trade into a loss.
A friend of mine tried to teach his 8-yr old daughter the concept of a straddle and his daughter goes, but isn’t that paying twice as much? You are buying two things instead of one.’
Pretty astute view from an 8-year-old, but that is a concern of many with these strategies.
That is why one must believe the security will move higher or lower a substantial amount to cover the cost of the trade and get to profitability.
It is taught by me and my instructors to consider this type of trading when there is an expected news event. The most reliable news event one can expect without needing any insider information is an Earnings Report. Stocks can jump or drop dramatically on an earnings beat or miss along with the company’s future guidance. These big moves can hurt an options trader if they take either a bullish (long call) or bearish (long put) stance and the earnings create a move in the stock opposite their directional guess.
Either Way is the Play
By creating a Straddle or a Strangle option trade one does not have to guess or predict or form an opinion on which way they think the security will go at earnings.
Either way is the play as both the Straddle or the Strangle gives one the opportunity for profit no matter if it goes higher or lower. The thing is it must move far enough to cover the cost of the trade and get profitable and big moves like that have a habit of happening with earnings reports.
The killer for either of these two strategies is no movement in the security so make sure you are considering this when you expect an even or announcement to happen that could move the price a substantial amount.
The Difference Between a Straddle and a Strangle
Both are viable options strategies. One uses them to go after profit from big price moves. And to do so without needing to predict which direction the move will be.
There are differences in how they are structured and the cost of setting them up.
Straddle:
- Buys to Open a call and put with the same strike price and expiration (usually same number of contracts of each).
- Cost – The more expensive of the two (since both strikes are considered At the Money – ATM)
- Potential Profit – unlimited up to time of expiration and substantial potential loss, but your max risk is total paid to ‘open’ the trade.
Strangle:
Here is a quick breakdown:
- Buys to Open a call and a put at different strike prices and expiration is the same (usually the same number of contracts on each).
- Cost – The least expensive of the two (since both strikes are Out of the Money – OTM)
- Potential Profit – unlimited up to time of expiration and substantial potential loss, but your max risk is total paid to ‘open’ the trade. Same as a Straddle, but needs a bigger price move in the underlying security.
To further clarify:
A straddle is more aggressive and needs less of a price move to be profitable.
A strangle is more cost-effective but needs a bigger move in either direction.
Patterns & Profits
I teach options education, I run multiple videos each week, where I give my overall market view, my sector specific insights and discuss potential stocks and ETF’s and crypto currencies.
I then break down for everyone where I see the security (stock, ETF or crypto) going in price and by when and if you want to learn from me a great place to start is my site Patterns and Profits.
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