A three-pronged currency option combination that involves the simultaneous selling of an at-the-money put and buying of both an out-of-the-money call and an out-of-the-money put. All three options typically have the same maturity date and one notional amount in a specific currency. This option strategy is almost costless as the purchase of the out-of-the-money options is financed by selling the at-the-money put. Sometimes, the strike prices may need to be adjusted to fine-tune the risk-reward requirements. The long seagull is usually used to have access to an unlimited reward potential in case the underlying currency appreciates while limiting losses in an opposite scenario.
April 27, 2023