Long Guts Calculator
Long guts buys an in-the-money call and an in-the-money put — a strangle built from ITM options. Like a straddle, it profits from a big move in either direction, but both legs carry intrinsic value, so the position is more expensive and a guaranteed slice of value sits between the strikes.
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Key characteristics
- Buy an ITM call and an ITM put: a long-volatility trade with built-in intrinsic value.
- Profits from a large move either way; loses if the stock stalls between the strikes.
- Max loss = net debit − strike width (the intrinsic value guaranteed between strikes).
- Breakevens sit just outside the two strikes by the small net time premium paid.
When to use long guts
Use it when you expect a sharp move but want most of your premium parked in intrinsic value rather than at-the-money extrinsic value. Because both options are in the money, a smaller share of the cost is pure time value, so less of the position decays away if the move is slow.
It is the in-the-money cousin of the strangle. The strike width (call strike below spot, put strike above spot) is always worth its full amount at expiration, which is why the maximum loss is only the time premium, not the whole debit.
Risks and management
The trade-offs are cost and liquidity. ITM options tie up more capital and usually have wider bid/ask spreads, so you pay more to enter and exit. The guaranteed intrinsic value limits the loss, but you can still lose the entire time premium if the stock pins between the strikes.
As with any long-volatility trade, avoid opening it when implied volatility is already elevated — an IV crush after an event can erode the extrinsic portion even if the stock moves.
Calculate it live
Use the free OptionProfit Long Guts calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
- A strangle made of ITM options — long volatility with built-in intrinsic value.
- Max loss is only the time premium (debit − strike width), not the full cost.
- More expensive and wider spreads than a straddle or strangle.
- Still hurt by a flat stock and by falling implied volatility.
Frequently asked questions
Why buy guts instead of a straddle?
Because a larger share of the cost is intrinsic value, which cannot decay. Less of your premium is at-risk time value, though you commit more capital and cross wider spreads.
How can the max loss be so small?
The ITM call and ITM put always retain the strike-width in intrinsic value at expiration. You can only lose the net time premium you paid on top of that intrinsic value.
Is short guts a thing?
Yes — selling an ITM call and ITM put is short guts, a short-volatility income trade, but it carries large risk and assignment complications, so it is far less common.
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