Short Strangle options strategy
A short strangle sells an out-of-the-money call and put. It benefits from time decay and a range-bound market but carries very large tail risk.
- Market outlook
- Neutral
- Construction
- Sell an out-of-the-money call and put.
- Maximum risk
- Unlimited on the upside and substantial on the downside.
- Maximum reward
- Premium received.
- Breakeven at expiry
- Put strike minus credit and call strike plus credit.
Strategy questions
- What is a Short Strangle?
- A short strangle sells an out-of-the-money call and put. It benefits from time decay and a range-bound market but carries very large tail risk.
- What is the maximum risk of a Short Strangle?
- Unlimited on the upside and substantial on the downside.
Risk note
Options are leveraged and expire. Model payoff at multiple prices and volatility levels in the Options Strategy Lab before considering a position.