Short Strangle options strategy
A short strangle sells an out-of-the-money put and call, collecting premium over a wider profit range than a straddle in exchange for a smaller credit and large tail risk.
How the short strangle is built
Sell the 190 put for 5 and the 210 call for 5, for a total credit of 10.
Profit and loss at expiration
The expiration payoff is calculated as: Profit = 10 − max(190 − S, 0) − max(S − 210, 0).
- Maximum profit
- The total premium received = $10 per share, anywhere between the two strikes.
- Maximum loss
- Very large — losses grow beyond the breakevens in either direction.
- Breakeven
- Lower strike − credit and upper strike + credit = 180 and 220.
Worked example
At an expiration price of 200, both options expire worthless and you keep the full $10 credit per share.
When to use it
Use it when you expect a wide but range-bound market and want a broader profit zone than a straddle.
Managing the risk
Tail risk is substantial. Many traders convert to an iron condor to define the maximum loss.
Frequently asked questions
How is a strangle different from a straddle?
A strangle uses out-of-the-money strikes for a wider profit range and lower credit; a straddle uses the same strike.
How do I limit short strangle risk?
Add long wings to convert it into a defined-risk iron condor.
Model this strategy
Open the free OptCurve calculator to plot the short strangle payoff, mark breakevens, and overlay it with other strategies.
Open the P&L calculator