Which option strategy maximizes profit from significant price movements?

The strangle strategy is designed to capitalize on significant price movements in the underlying asset. This strategy involves buying both a call option and a put option at different strike prices but with the same expiration date. The primary goal of this approach is to benefit from volatility; when the price of the underlying stock moves significantly, either upwards or downwards, one of the options will become profitable.

This strategy is particularly effective in markets where large price swings are anticipated, as the profits from the movement in one option can outweigh the costs associated with both options. As the underlying asset's price moves significantly away from the strike prices of the options purchased, the potential for profit increases, allowing traders to maximize their gains.

Other strategies, such as the covered call and iron condor, typically work better in stable or slightly bullish markets and often limit profit potential to a certain extent. Covered calls can generate income but do not benefit from large movements, while an iron condor aims to profit from low volatility, making it less suitable for scenarios involving significant price fluctuations. The vertical spread strategy also relies on price direction but usually has limited risk and reward compared to a strangle, which is more geared toward capturing larger movements.