Max profit
$83.30
Short strangle calculator
Sells a put and a call outside the range for a bigger credit, with no protection on either side. Enter your strikes and price to see the maximum profit, maximum loss, breakevens, profit chance and expected value.
Leave the price empty to estimate it from implied volatility. Results are per contract (100 shares), held to expiration.
Estimated credit: $83.30 per contract (from implied volatility; type your real price above)
Max loss
Unlimited
Breakevens
$91.17 / $109.83
Profit chance ?
80.6%
Expected value ?
+$48.01
Get the full verdict on this trade
Free, no account. The app adds volatility skew, exit plans, position sizing and a plain-English verdict.
How to use the short strangle calculator
- Enter the stock's price, the days left until expiration and the implied volatility from your option chain.
- Enter each strike. Then type the credit you'd receive per share, or leave it empty for an estimate.
- Add the stock's realized volatility to see expected value: what the trade makes on average if the stock keeps moving the way it has been.
Worked example
Say a stock trades at $100, options price in 25% implied volatility, and the stock has really been moving about 20% a year (its realized volatility). With 30 days to expiration, a short strangle at strikes 92 / 109 collects about $0.83 per share, or $83.30 per contract.
- Max profit: $83.30
- Max loss: unlimited (a big enough move keeps costing more)
- Breakevens: $91.17 and $109.83
- Profit chance, market-implied: 80.6%
- Expected value with 20% realized volatility: +$48.01 per contract
The expected value is positive here only because the stock is assumed to move less than options price in (20% vs 25%). If it moves more, the same trade can have negative expected value. That gap between implied and realized volatility is what the full app checks first.
What is a short strangle?
A short strangle sells an out-of-the-money put and an out-of-the-money call. There are no long options, so nothing caps the loss.
How it makes or loses money
If the price stays between the strikes, both expire worthless and you keep the credit. Past either strike, the loss grows with every point, with no limit on the call side.
When traders use it
Traders with large accounts use it when they expect a range and implied vol is rich. It collects more than an iron condor because there are no wings to pay for.
Profit and loss at expiration
- Max profit: the credit received
- Max loss: uncapped (Verdict sizes it on a stress move)
- Breakevens: put strike minus the credit, call strike plus the credit
The Greeks
| Greek | Sign |
|---|---|
| Delta | ≈ 0 |
| Theta | + |
| Vega | − |
| Gamma | − |
What to watch out for
- One gap can lose many months of credits. Size on the stress loss, not the credit.
- Brokers require margin and may raise it when the market moves against you.
Questions
What is the max profit on a short strangle?
The credit received. In the example above that's $83.30 per contract.
What is the max loss on a short strangle?
Uncapped (Verdict sizes it on a stress move). There's no fixed cap, so size it on a stress move, not on a max loss.
How do you calculate the breakeven of a short strangle?
Put strike minus the credit, call strike plus the credit. The calculator works it out from your strikes and price.
What does "profit chance" mean here?
It's the market-implied chance that the trade finishes with any profit at expiration, if the stock moves as much as implied volatility prices in. It assumes you hold to expiration and uses one volatility for every strike. A high profit chance doesn't mean a good trade: small, frequent wins can still lose money overall if the losses are large.
What's the difference between implied and realized volatility?
Implied volatility is how much movement option prices assume. Realized volatility is how much the stock has actually been moving. Option sellers tend to come out ahead on average when realized stays below implied, and buyers when it runs above. Expected value in this calculator uses the realized volatility you enter.
Is a short strangle a good trade?
This calculator can't tell you that, and neither can anyone who doesn't know your account, goals and risk tolerance. It shows the math for the numbers you enter. Whether those numbers hold up depends on the price you actually get, how the stock moves and how you manage the trade.