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.