Short Strangle
Outlook: Neutral
Volatility
Short 1 OTM call + short 1 OTM put. Wider profit zone than short straddle. Open-ended risk.
Max profit
Total credit, anywhere between the two short strikes at expiration.
Max loss
Theoretically unlimited above and very large below.
Breakeven
Short call + credit and short put - credit.
Legs
Short
1×
put
ATM −10
Short
1×
call
ATM +10
Structure
Short 1 OTM call + short 1 OTM put, same expiration.
When to use
Same as short straddle but with a wider profit window and lower premium. Wrapped as iron condor to define risk.
Example
SPY at $450. Short 460 call $3 + short 440 put $3. Credit $6. Profit zone $434 to $466.
Notes
- Iron condor is the same idea with bounded loss.
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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