Strategy Overview
High RiskAdvancedNeutral
A short straddle involves selling both an ATM call and put. You profit when the stock stays near the strike, collecting premium from time decay.
Max Profit
Premium received
Max Loss
Unlimited
Breakeven
Strike +/- premium received
Probability
~55% win rate
hist. est.
This strategy has unlimited downside risk. Use strict risk management.
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Example Setup Calculator
$
Credit Received
$400
Max Profit
$400
Max Loss
Unlimited
Breakeven
$96.00 / $104.00
Strategy Components
SELL ATM CALL
Sell ATM call
SELL ATM PUT
Sell ATM put
When to Use
- You expect very little movement
- IV is very high and expected to drop
- You can handle undefined risk
- You have margin available
Best Market Conditions
- Very high IV
- Post-catalyst IV crush expected
- Extremely range-bound market
Best Practices
- Use only with strict risk management
- Have a stop-loss plan
- Close early on big moves
- Consider converting to iron butterfly
Ready to Trade?
Review Short Straddle and practice it in paper trading with the school workflow.
Paper Trading