Strategy Overview
High RiskAdvancedNeutral
A short strangle involves selling an OTM call and OTM put. You profit when the stock stays between the strikes, giving you a wider profitable range than a straddle.
Max Profit
Premium received
Max Loss
Unlimited
Breakeven
Strikes +/- premium received (two breakevens)
Probability
~70% 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 OTM CALL
Sell OTM call
SELL OTM PUT
Sell OTM put
When to Use
- You expect range-bound action
- IV is elevated
- You can handle undefined risk
- You want wider profit zone than straddle
Best Market Conditions
- High IV rank
- Range-bound market
- No major catalysts expected
Best Practices
- Place strikes at 1+ standard deviations
- Manage at 50% profit
- Have adjustment plan for breached strikes
- Consider converting to iron condor
Ready to Trade?
Review Short Strangle and practice it in paper trading with the school workflow.
Paper Trading