Long Guts
Components
Buy one call option and buy one put option at a higher strike price.
Risk / Reward
Maximum Loss: Limited to the total premium paid for the call and put options.
Maximum Gain: Unlimited as the market moves in either direction.
Characteristics
When to use: When you are bullish on volatility but are unsure of market direction.
A long guts has the same profile as a Long Strangle. The difference is that with a guts you only buy ITM options. A strangle you buy OTM options.
Comments (8)
Peter
August 1st, 2010 at 9:02pm
As long as the underlying asset is above (below) the higher (lower) strike at the expiration date - plus premium paid - you will make money.
anjanappa chintamani
August 1st, 2010 at 1:21am
suppose market either moves one side gain another side loss but how to earn money
sanjay
June 24th, 2010 at 4:22pm
sir , please give an example with every strategies .this is easier to me understand quickly
Steve
September 29th, 2009 at 3:55am
You are such an option gun
Gaurav
August 28th, 2009 at 5:53am
Hi there,
Sir can you explain this strategy GUTS with an example because i not getting it completely..
Nitesh
August 25th, 2008 at 6:10am
Thanks for the explanation. Appreciated.
Admin
August 25th, 2008 at 5:34am
Hi Nitesh,
I see what you're saying and it would be true if the call were purchased at a higher strike price. However, I say that the put is purchased with a higher strike price, not the call.
So, the definition is for the put to have a higher strike price AND for both options to be ITM.
Know what I mean?
Nitesh
August 25th, 2008 at 3:20am
Under components you say, that Buy one call option and buy one put option at a higher strike price. However, if you that in Guts (as mentioned under Characteristics) that you buy in the ITM options it doesn't hold true with the call option at a higher strike price. If you buy a call option at a higher strike price it will be OTM call option instead of ITM call option.
Let me know if I am correct else please give me a explanation.
Thank you
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