Short Strangle Strategy
Sell OTM call and put. Wider profit range than straddle. Unlimited risk.
What is a Short Strangle?
A Short Strangle involves selling an OTM call and OTM put. Wider profit range than a short straddle but less premium collected. Popular income strategy. Warning: unlimited risk above the call strike. Manage aggressively.
When to Use a Short Strangle
Use when expecting low volatility with no strong directional bias. Best in high IV. Typical setup: 30-45 DTE, both strikes at 1 SD OTM for 80%+ POP. Close at 50% profit.
Key Formulas
- Max Profit
- Total premium received × lot size
- Max Loss
- Unlimited (call side)
- Breakeven
- Call strike + premium / Put strike - premium
Example Trades
Sell AAPL $210 Call for $2, $190 Put for $2. Collect $400. Profit if AAPL stays between $186-$214.
Sell NIFTY 22800 Call for ₹100, 22200 Put for ₹100. Collect ₹13,000 (× 65). Profit if NIFTY stays between 22000–23000 at expiry.
Common Mistakes to Avoid
- Selling through earnings
- Not having defined exit rules (close at 50%, stop at 2x)
- Ignoring position sizing (small accounts beware)
- Rolling against a strong trend
Related Strategies
Short Strangle FAQ
What is a Short Strangle?
A Short Strangle involves selling an OTM call and OTM put. Wider profit range than a short straddle but less premium collected. Popular income strategy. Warning: unlimited risk above the call strike. Manage aggressively.
When should I use a Short Strangle?
Use when expecting low volatility with no strong directional bias. Best in high IV. Typical setup: 30-45 DTE, both strikes at 1 SD OTM for 80%+ POP. Close at 50% profit.
What is the maximum profit and loss for a Short Strangle?
Max profit: Total premium received × lot size. Max loss: Unlimited (call side).
What is the breakeven price for a Short Strangle?
Breakeven: Call strike + premium / Put strike - premium. US example: Sell AAPL $210 Call for $2, $190 Put for $2. Collect $400. Profit if AAPL stays between $186-$214. Indian-index example: Sell NIFTY 22800 Call for ₹100, 22200 Put for ₹100. Collect ₹13,000 (× 65). Profit if NIFTY stays between 22000–23000 at expiry.
What are common mistakes when trading a Short Strangle?
Common mistakes include: Selling through earnings; Not having defined exit rules (close at 50%, stop at 2x); Ignoring position sizing (small accounts beware); Rolling against a strong trend.
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