Short Strangle Calculator
neutralA short strangle involves selling an OTM call and an OTM put. You collect premium and profit if the stock stays between your strikes. Warning: this strategy has unlimited risk on both sides.
Max Profit
Total credit received × 100
Max Loss
Unlimited (both directions)
Break Even
Call strike + Total credit / Put strike − Total credit
When to Use a Short Strangle
- You expect the stock to stay in a range through expiration
- Implied volatility is elevated and you want to sell premium
- You have sufficient margin and risk tolerance for undefined risk
- You want higher probability of profit vs. iron condor (no wings)
Risks
- Unlimited loss on both sides — a large move in either direction can be catastrophic
- Margin requirements are significant
- A gap move (earnings, news) can cause massive losses overnight
How a Short Strangle Works
Sell an OTM call and an OTM put with the same expiration. You collect premium and want the stock to stay between your strikes.
Example
AAPL at $195. Sell the $205 call for $2.20, sell the $185 put for $1.90. Total credit: $4.10 ($410).
Key Takeaway
Short strangles are high-probability, high-risk. You collect premium and profit ~71% of the time, but a tail event can wipe out months of gains. Many traders prefer the iron condor (wings added) for defined risk.