Making Money When Direction is Uncertain: The Strangle Options Strategy for Crypto Traders

You’ve probably heard it before: “It could move up, or it could go down.” Most traders dismiss this as useless commentary. But for options traders in the crypto space, this statement opens the door to profitable opportunities. The reason? They understand volatility-based strategies like strangles, which let them capitalize on price swings regardless of direction.

In this guide, we’ll break down how strangles work, why they appeal to seasoned options traders, and what risks you need to manage before deploying this strategy.

What Makes Strangles Attractive to Options Traders?

The appeal of strangle options lies in their fundamental premise: profit potential exists on either side of a price movement. Whether a digital asset rallies or crashes, as long as the move is large enough, traders win. This is particularly valuable when you’ve done your research but can’t decisively call the direction.

Strangles accomplish this by combining two positions simultaneously:

• Long call at an out-of-the-money (OTM) strike price (above current market price)
• Long put at an out-of-the-money strike price (below current market price)

Both contracts expire on the same date, but at different strike prices. This bidirectional setup means the strategy benefits from volatility in either direction—up or down.

The real edge? Strangles capitalize on implied volatility (IV)—the market’s expectation of future price swings. Traders who understand IV can time strangles around catalysts: regulatory announcements, major network upgrades, Fed policy changes, or anticipated approval decisions (like a Bitcoin spot ETF).

Implied Volatility: The Foundation You Need to Understand

Strangle strategies live and die by implied volatility. IV measures the market’s uncertainty about future price movements in an options contract. It fluctuates constantly based on buying and selling activity among options traders and tends to spike before significant events.

For example, IV typically increases right before a major blockchain upgrade or a crucial macroeconomic announcement. This rising IV increases options premiums, making strangles more expensive upfront but setting up better profit potential if the anticipated move happens.

If you enter a strangle when IV is low, you’re betting on volatility that may never materialize. That’s why understanding IV cycles is essential before committing capital.

The Real Advantages of Trading Strangles

Lower Capital Requirements

Strangles use OTM options, which carry lower premiums than in-the-money (ITM) contracts due to lacking intrinsic value. This affordability lets traders with moderate capital still deploy meaningful positions and use leverage if their risk management allows.

Directional Neutrality

Unlike bullish or bearish strategies that require you to get the direction right, strangles eliminate directional risk. You’re not betting on up or down—you’re betting on movement itself. For traders stuck between competing narratives or waiting for clarity, this is invaluable.

High Profit Potential

If the underlying asset makes a substantial move, the profit potential (especially in long strangles) is theoretically unlimited. A 15-20% swing in either direction can turn a small premium payment into significant gains.

Where Strangles Can Hurt You

Dependence on Timing and Catalysts

Because strangles need large moves to profit, you must have conviction about an upcoming catalyst. Miss the catalyst or misjudge its impact, and your premiums evaporate. Theta decay—the daily loss in time value—eats into your position if volatility doesn’t materialize.

Not for Beginners

OTM options decay rapidly as expiration approaches. A beginner who miscalculates strike prices or expiry dates can lose most or all of their premium in days. The margin for error is small, requiring precise execution and market timing.

Requires Significant Movement

OTM strangles only turn profitable if the asset moves substantially beyond the strike prices. A 5% move might leave both options worthless at expiration. You need the asset to break through your strikes to achieve breakeven, let alone profit.

Long Strangles vs. Short Strangles: Different Risk Profiles

Long Strangle (Buying Both Calls and Puts)

You purchase both the call and put, paying premiums upfront. Your risk is limited to the total premium paid. Your upside is theoretically unlimited if the asset moves far enough in either direction.

Practical Example:

Assume Bitcoin is trading around $96.26K currently. You expect significant volatility around a major catalyst but aren’t sure which way it breaks. You could structure a long strangle by:

• Buying a $92K BTC put
• Buying a $100K BTC call
• Both expiring 30 days out
• Total premium cost: approximately $1,500

For this strangle to profit, Bitcoin needs to move either below $90,500 or above $101,500 (breaking even adjusts for the premium paid). If BTC rallies to $105K, your call option moves deep ITM, generating substantial profit. Conversely, if BTC crashes to $88K, your put profits significantly.

Short Strangle (Selling Both Calls and Puts)

You collect premiums upfront by selling both the call and put. Your profit is capped at the premium collected, but your risk becomes unlimited if the asset moves against your position.

Practical Example:

Using the same BTC scenario, if you believe Bitcoin will trade sideways despite volatility expectations, you’d execute a short strangle:

• Sell a $92K BTC put
• Sell a $100K BTC call
• Collect approximately $1,500 in premiums
• Both expire in 30 days

Your maximum profit is the $1,500 premium. However, if Bitcoin unexpectedly rallies to $105K, the $100K call becomes deeply ITM, and your losses exceed the premium you collected. You’re now exposed to theoretically unlimited downside risk.

This is why short strangles demand rigorous risk management and clear exit rules.

Long Strangles Are Generally Safer

Long strangles appeal to most options traders because losses are limited to the premium paid. You know your maximum risk upfront. With short strangles, losses can spiral, making them riskier for account capital.

Strangles vs. Straddles: Which Should You Choose?

Both strategies target uncertain directions and volatility. The key difference:

Strangles use different strike prices (OTM calls and OTM puts), making them cheaper but requiring larger price moves to profit.

Straddles use the same strike price (ATM calls and ATM puts), costing more but requiring smaller moves to break even.

Strangles fit traders who:

• Have limited capital
• Expect very large moves
• Can tolerate missing profitable opportunities if moves are moderate

Straddles fit traders who:

• Have adequate capital
• Want lower risk
• Expect moderate-to-large volatility

Key Takeaways for Strangle Traders

Strangles are volatility plays—they thrive when implied volatility rises around catalysts and collapse when volatility disappoints. They’re powerful tools for traders who understand timing and market structure but punishing for those who don’t respect their mechanics.

The strategy’s beauty is its flexibility: profit on either side. Its danger is requiring precise execution and catalyst conviction. Before deploying strangles with real capital, ensure you’ve mastered implied volatility concepts, selected appropriate strike prices relative to your risk tolerance, and identified concrete catalysts justifying your volatility bet.

Used wisely, strangles are a valuable addition to any options trader’s toolkit.