A three-pronged option trading strategy that involves buying (selling) a call spread and selling (buying) a put option in order to establish a hedge against unfavorable movements in the underlying asset. This strategy is often used in forex markets, where a hedger can hold a seagull option to establish a costless hedge against the appreciation of a given currency within a certain range. However, that won’t protect this hedger against a depreciating exchange rate.

Put another way, a seagull option is a one-direction protective technique whereby either downward or upward movements can be reined in, but not both. A seagull option position can be constructed by buying two calls and selling one put, or similarly by selling two calls and buying one put.