How to use this calculator
- Enter the current share price and days to expiration.
- Enter the short put — its strike and the premium you collect.
- Enter the short call — its strike and premium. Set it equal to the put strike for a straddle.
- Set the number of contracts — each multiplies the credit and the risk by × 100.
- Read the result: net credit, both breakevens, the profit zone and the probability of profit.
What it tells you: the price range you keep the credit in, and the breakevens beyond which the (undefined) losses begin.
How this calculator works
A short strangle is two naked short options: a short put below the price and a short call above it, same expiration. The net credit is the sum of the two premiums, and it is your max profit — kept whenever the stock finishes between the two strikes and both options expire worthless. Set the two strikes equal and it is a short straddle: more credit, but the profit peaks at a single price.
The breakevens mark where the credit runs out: the upper one is the call strike plus the credit, the lower one is the put strike minus the credit. The profit zone is the distance between them. Outside that zone the position loses — and here is the catch the calculator keeps front and centre: on the upside that loss is unlimited, because the naked call has no cap; on the downside it runs to the put strike minus the credit, times 100, if the stock reaches zero.
There is deliberately no return-on-capital figure. You cannot cash-secure a naked call, so the real capital is broker margin, which varies by broker and rises as volatility spikes. The honest way to size a strangle is by the move you could suffer, not by the credit you collect.
Worked example
A fixed, hypothetical illustration — not live market data.
A hypothetical stock trades at $100. With 45 days to expiration you sell the 95 put for $1.50 and the 105 call for $1.20 — a $2.70 net credit.
- Net credit / max profit: $2.70 × 100 = $270 per contract.
- Upper breakeven: $105 + $2.70 = $107.70.
- Lower breakeven: $95 − $2.70 = $92.30.
- Profit zone: $92.30 to $107.70 — about $15.40 wide.
- Max loss: unlimited above $107.70; up to $9,230 if the stock falls to zero.
Edge cases this calculator handles
- Straddle or strangle. Set the strikes equal and the structure label flips to "straddle"; the profit then peaks at the single strike rather than across a band.
- No fake return on capital. Because the call is naked, the calculator refuses to print a tidy ROC — it shows the credit, the zone and the loss profile, and tells you capital is broker margin.
- Unlimited upside. The max-loss field reads "Unlimited" on a rally rather than a comforting number, because that is the truth.
Common mistakes
- Treating a high probability of profit as safe. A strangle can win 80–90% of the time and still blow up an account on the one undefined loss. The math of rare, large losses is unforgiving.
- Selling through earnings or a catalyst. A gap straight through a strike is exactly the move the naked tails cannot survive. Know your event calendar.
- Sizing by the credit, not the risk. The credit is small and the potential loss is open-ended — size tiny, and have a defined exit before you open it.
- Ignoring the defined-risk alternative. For most retail accounts an iron condor or a Jade Lizard delivers a similar bet with a loss you can actually survive.
Frequently asked questions
What is a short strangle?
A short strangle sells an out-of-the-money put and an out-of-the-money call on the same underlying and expiration, with no protective wings. You collect both premiums and keep them if the stock stays between the strikes. It is an undefined-risk trade: the short call can lose without limit if the stock rallies, and the short put loses toward zero if it crashes.
What is the difference between a short strangle and a short straddle?
A short straddle sells the put and the call at the same strike, usually at the money — the most credit but the narrowest profit zone, so it needs the stock to pin one price. A short strangle moves the strikes apart (both out of the money): less credit, but a wider range to be right in. This calculator handles both — set the strikes equal for a straddle, apart for a strangle.
What is the max loss on a short strangle?
There is no defined max loss. The upside is unlimited — a runaway rally keeps costing you on the short call with no cap. The downside is large but finite: the short put loses down to (put strike − net credit) × 100 per contract if the stock falls to zero. This is why it needs the highest options-approval level and margin.
What are the breakevens on a short strangle?
Upper breakeven = call strike + net credit per share. Lower breakeven = put strike − net credit per share. The position is profitable at expiration anywhere between those two prices; outside them it loses, with no cap on the upside.
How do I cap the risk of a short strangle?
Buy wings. Adding a long put below and a long call above turns the open-ended tails into a defined maximum loss — that is an iron condor. Capping only the upside (adding a long call) while leaving the put cash-secured is a Jade Lizard. For most retail accounts a defined-risk version is the more sensible structure.
Related tools and guides
Cap the open tails with the Iron Condor Calculator, or cap just the upside with the Jade Lizard Calculator.
Before you sell one, see what 14 years of them actually returned: the short strangle backtest - a 78% win rate that still lost to buy-and-hold, because one crash month erased 42 winners.
Buying volatility instead of selling it? See the long straddle & strangle calculator, check premium is rich first with the IV Rank Calculator, and see the setup conventions in strategy setups.
Educational tool only. Nothing here is financial advice. A short strangle or straddle has undefined risk: the upside loss is unlimited and the downside loss is large, and a single adverse gap can exceed the credit many times over. It is unsuitable for many accounts; a defined-risk structure is usually the wiser choice.