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Short Strangle

A short strangle sells an out-of-the-money put and call in the same expiration. The profit zone is the wide gap between the strikes — you win if the stock stays inside it, and you're paid up front for taking undefined risk on both tails.

When it makes sense

IV rank is high and premium is rich relative to the expected move
You expect range-bound trading with no scheduled catalysts
You want a higher probability of profit than a short straddle, at a smaller credit

How it works

Sell a put below the stock and a call above it — commonly around 15–20 delta each. Keep the full credit if the stock finishes between the strikes. Breakevens sit outside each strike by the amount of the credit.

Risk & reward

Maximum profit: the credit. Maximum loss: unlimited above, severe below. Win rate is high; the occasional tail move is what does the damage. Standard discipline is closing at 50% of max profit and never selling strangles through earnings unintentionally.

Worked example

Stock at $200. Sell the 35-day $180 put and $220 call for $4.20 ($420). Stock anywhere between $180 and $220 at expiration: keep $420. Stock at $240: lose $1,580.

Scan the market for short strangles

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