Long Guts: ITM Strangle Variant

A long guts buys an ITM call and an ITM put at different strikes, same expiration. Inverse of a strangle, which uses OTM legs. Both legs have intrinsic value at entry; the position is expensive but has a wider in-the-money profit zone.

Construction: buy the ITM call at a lower strike; buy the ITM put at a higher strike. Both legs have intrinsic value, so the total cost is high (often 50–100% more than an OTM strangle). The trade-off: the position has positive intrinsic value at entry, so the moves required to hit max profit are smaller than for an OTM strangle.

Rare structure; mostly used by sophisticated traders exploiting unusual put-call pricing dislocations. Most retail traders should default to strangles (cheaper, lower probability) or straddles (cleaner risk profile) rather than guts. The structure exists primarily for completeness in the options strategy taxonomy.

Frequently Asked Questions

Why would I use long guts over a strangle?

Rarely. Most use cases are arbitrage or pricing-dislocation plays accessible only to professional traders.

How does long guts differ from a straddle?

Different strikes (one ITM call, one ITM put) instead of the same strike on both legs. Wider intrinsic-value zone, more expensive.

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