Short Straddle
Outlook: Neutral
Volatility
Short 1 ATM call + short 1 ATM put. Collects max premium. Open-ended risk both ways.
Max profit
Total credit collected, at the strike on expiration.
Max loss
Theoretically unlimited above the upside breakeven; very large below the downside.
Breakeven
Strike + credit and strike - credit.
Legs
Short
1×
call
ATM
Short
1×
put
ATM
Structure
Short 1 call + short 1 put at the same ATM strike, same expiration.
When to use
High IV expected to crush, tight range expected. Almost always wrapped as iron butterfly to define risk.
Example
SPY at $450 30 DTE. Short 450 call $7 + short 450 put $6. Credit $13. Profit zone $437 to $463.
Notes
- Naked tail risk on both sides. Iron butterfly is the defined-risk equivalent.
Build it in the simulator
Open this structure in the app, adjust spot, IV, and DTE, and watch the payoff and Greeks move.
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