Options Strategies
Short Strangle
Strategies Short Strangle
Component Sell lower strike price/level put, sell higher strike price/level call of the same month
Potential Profit
  • When the stock price/index level is between the upper and lower break-even points
  • Limited to total premium received
Maximum Loss
  • When the stock price/index level is below the lower break-even point, substantial and equals to lower break-even point minus stock price/index level
  • When stock price/index level is above the upper break-even point, unlimited and equals to stock price/index level minus upper break-even point
Time Value Impact Positive
  • The lower break-even point equals to lower strike price/level minus total premium received
  • The upper break-even point equals to higher strike price/level plus total premium received
Remarks Compared with Short Straddle, Short Strangle has less premium receivable but requires higher market volatility to result in a loss.
  Net Position -1 Jun 180 Put -1 Jun 200 Call

Component Sell ABC Jun $180 Put, receive $5, and sell ABC Jun $200 Call, receive $10
Net Premium Receive $5+$10=$15
  • Lower: $180-$15=$165
  • Upper: $200+$15=$215
Profit when Stock price is between $165 and $215
Potential Profit $15
Potential Loss
  • When the stock price is below $165, $165 - stock price
  • When the stock price is above $215, stock price - $215
Time Value Impact Positive