Short Strangle
Description
Selling an out-of-the-money call and an out-of-the-money put, collecting premium on a bet that the underlying stays within a range.
Setup
- Sell one out-of-the-money call.
- Sell one out-of-the-money put, same expiry.
Context
Used when a large move is considered unlikely; the wider strikes than a short straddle give the underlying more room before the position starts to lose.
Risk Profile
Maximum gain is the combined premium collected, realized if the underlying finishes between the two strikes. Loss grows without bound on a large move in either direction.
Pros
- Wider profit range than a short straddle.
- Collects premium up front.
- Benefits from a drop in implied volatility.
Cons
- Unlimited loss potential on a large move.
- Requires significant margin.
- Smaller premium collected than a short straddle for the same underlying.
Effect of Time
Time decay favors the position every day the underlying stays between the two strikes.
Effect of Volatility
A rise in implied volatility hurts the position by inflating the value of both short options.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Short | Call | 1 | $85000.0000 | 24 Sep 2026 | $67.4869 | $59.0510 | $8.4359 |
| Short | Put | 1 | $84000.0000 | 24 Sep 2026 | $113.8842 | $101.2304 | $14.2355 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | -$1000.0000 | -$818.6289 | -451.4% |
| $83818.6289 breakeven | -$181.3711 | $0.0000 | +0.0% |
| $84000.0000 | $0.0000 | $181.3711 | +100.0% |
| $84358.6300 current | $0.0000 | $181.3711 | +100.0% |
| $85000.0000 | $0.0000 | $181.3711 | +100.0% |
| $85181.3711 breakeven | -$181.3711 | $0.0000 | +0.0% |
| $86000.0000 | -$1000.0000 | -$818.6289 | -451.4% |