Strategy lesson · Advanced · neutral
Short Strangle Explained
Sell OTM call and OTM put for a credit — profits if price stays between strikes; undefined risk without wings.
How a Short Strangle is built
Short OTM call + short OTM put.
- Leg 1: sell call · strike template 110 · premium ~1.8 · 1 contract(s)
- Leg 2: sell put · strike template 90 · premium ~1.8 · 1 contract(s)
Risk & reward snapshot
| Market bias | neutral |
|---|---|
| Max profit | Credit received. |
| Max loss | Large on either side (unlimited on calls). |
| Breakeven | Short put − credit and short call + credit. |
Figures are conceptual for the classic structure. Your actual premiums, strikes, and fees change the numbers — confirm on the calculator.
When traders use it
- Range-bound market and elevated premium; advanced traders only if naked.
Key risks
- Breakouts and gap risk; margin calls possible.
Practical tips
- Iron condor adds wings to define risk — usually the safer teaching analog.
Practice on the calculator
- Open the Short Strangle calculator.
- Load a symbol and option chain; fill realistic mid premiums.
- Review max profit, max loss, breakevens, and the date × price heatmap.
- Change strikes and DTE to see how risk shape shifts.
FAQ
What is a Short Strangle?
Sell OTM call and OTM put for a credit — profits if price stays between strikes; undefined risk without wings.
What is the max loss on a Short Strangle?
Large on either side (unlimited on calls).
When should I use a Short Strangle?
Range-bound market and elevated premium; advanced traders only if naked.