Neutral STRG

Short Strangle Strategy

Wider profit zone than a short straddle — still collect premium, still risky.

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What is the Short Strangle Options Strategy?

A Short Strangle is similar to a Short Straddle but both options are OUT of the money. You give the stock more room to move before you start losing. Less premium, wider zone.

Why is it Called "Short Strangle"?

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"Short" = you SOLD both. "Strangle" = two options at different strikes squeezing the stock between them. If it stays between, you profit.

How Does the Short Strangle Trade Work?

  1. 1 Step 1 — Pick a stock expected to stay calm.
  2. 2 Step 2 — Sell a call 3–5% above current price.
  3. 3 Step 3 — Sell a put 3–5% below current price.
  4. 4 Step 4 — Collect the combined premium.
  5. 5 Step 5 — If stock stays between both sold strikes, both expire worthless and you keep the credit.

Types of Short Strangle Strategies

Most Common

Short Strangle (Standard)

Sell OTM call and OTM put. Wider profit zone. Still unlimited risk.

Iron Condor (Safer Version)

A Short Strangle with protective wings. Caps your maximum loss. Strongly recommended over naked strangle.

When to Use the Short Strangle Strategy?

  • ✓ Calm markets
  • ✓ Expensive options
  • ✓ Right after big events
  • ✓ Only with a clear exit plan

Profit and Loss of the Short Strangle

Before looking at the chart, here is a plain-English summary of what you can make and what you can lose.

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Maximum Profit

The total credit collected.

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Maximum Loss

Unlimited.

⚖️
Breakeven Point

Lower: put strike − credit. Upper: call strike + credit.

Short Strangle Payoff Diagram

The chart below shows how profit/loss changes with the underlying price at expiry. Green zone = profit, red zone = loss.

Short Strangle Payoff Diagram illustrating profit and loss zones over underlying price0Low priceHigh priceProfitLoss
Illustrative payoff at expiry — not to scale

Short Strangle Example Trade

NIFTY at ₹22,000 Expiry: 21 days out
ActionTypeStrikePremium
SellCall₹22,500+₹100
SellPut₹21,500+₹95
Net Credit/Debit +₹195
Max Profit ₹195
Max Loss Unlimited
Breakevens: ₹21,305₹22,695
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NIFTY stayed ₹21,700–₹22,300. Both expired worthless. Kept ₹195.

Pros & Cons of the Short Strangle

✓ Advantages
  • Wider profit zone
  • Good premium
  • Every day in calm market adds profit
  • Wins in sideways/mildly trending conditions
✗ Disadvantages
  • Unlimited loss
  • Constant monitoring
  • Large margin
  • NOT for beginners — consider Iron Condor

Short Strangle Frequently Asked Questions

Test Yourself

Quick Quiz

Answer all questions and check your score.

1 A Short Strangle profits when:

2 Maximum loss on a Short Strangle is:

3 A Short Strangle has a wider profit zone than a Short Straddle because:

4 Short Strangle is best deployed when:

5 The safest upgrade to a Short Strangle that caps the maximum loss is: