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Mambo Combo


A volatility strategy, which is an expensive variation on the strangle. The mambo combo is based on buying higher strike puts and lower strike calls both expiring on the same date. More specifically, it combines- both long or both short- an in-the-money call and an in-the-money put. In this case, an investor can profit from the stock price soaring up or plummeting down. As with the strangle, each leg of the trade has floored downside (i.e., the call or put premium) but unlimited upside. This strategy creates a higher cost basis than that in the strangle.

The mambo combo is also known as guts.



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