What is a Short Strangle?
Updated 12 July 2026 · by Theo Chen
A short strangle sells an out-of-the-money put and an out-of-the-money call for premium, betting the stock sits between the two strikes through expiration. It is the seller's version of a strangle, and it carries undefined risk: the naked call can lose without limit on a rally, and the naked put loses toward zero on a crash.
Undefined risk
This is the most dangerous trade most retail traders will meet. There is no maximum loss: a runaway rally keeps costing you with no cap, and a single gap or earnings surprise can cost many times the credit. Want the same range bet with a capped loss? An iron condor caps both sides; a jade lizard caps the upside.
Want the net credit, both breakevens and the profit zone for a specific strangle (or straddle)? Plug in your strikes and premiums — the calculator keeps the undefined-risk warning front and centre.
Open the Short Strangle Calculator →How is a short strangle built?
Two naked short options, one expiration:
- Sell a put below the current price (your short put).
- Sell a call above the current price (your short call).
You collect both premiums as a net credit, and that credit is the most you can make. Set the two strikes at the same price instead of apart and it becomes a short straddle — more credit, but the profit peaks at a single price rather than across a band.
The payoff: credit, breakevens and open tails
- Max profit = the net credit, kept whenever the stock finishes between the two strikes.
- Upper breakeven = the call strike plus the credit; lower breakeven = the put strike minus the credit.
- Max loss = unlimited above the upper breakeven, and (put strike − credit) × 100 down to zero below the lower one. There is no cap on the upside.
A worked example
A stock trades at $100. With 45 days left 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, kept between $95 and $105.
- Breakevens: $92.30 and $107.70 — a $15.40-wide profit zone.
- Max loss: unlimited above $107.70; up to $9,230 if the stock falls to zero.
Sell the $95 put and $105 call (red) for a $2.70 net credit. Flat profit between the strikes; losses fall away on both sides — open-ended on the upside, down to roughly $9,230 at zero on the downside.
When a short strangle makes sense
A strangle pays best on a liquid, range-bound underlying when implied volatility is high — you are selling expensive premium expecting it to deflate, with a wide zone to be right in. But the case against it is just as important: the win rate is seductive and the rare loss is undefined, so the only real risk control is position size. Sell tiny, avoid earnings and catalysts, manage early, and have a hard exit before you open it. If any of that sounds like more than you want to babysit, run a defined-risk iron condor or a jade lizard instead — you keep most of the bet and put a floor under the loss.
The bottom line
A short strangle sells an out-of-the-money put and call to collect premium in a quiet stock, but its risk is undefined - unlimited on a rally and large on a crash - so the high win rate is deceptive and a single gap can erase a long run of small wins; most retail traders are better served by a defined-risk iron condor or jade lizard.
Frequently asked questions
What is a short strangle in simple terms?
A short strangle sells an out-of-the-money put and an out-of-the-money call on the same stock and expiration, with no protective wings. You collect both premiums and keep them if the stock stays between the two strikes through expiration. It is an undefined-risk income 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 maximum loss on a short strangle?
There is no defined maximum loss. The upside is unlimited — a runaway rally keeps costing you on the naked short call with no cap. The downside is large but finite: the short put loses down to (put strike minus net credit) times 100 per contract if the stock falls to zero. Because one tail is open-ended, you size a strangle by the move you could suffer, not by the credit you collect.
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 premium, 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 premium, but a wider range to be right in. Both are undefined-risk; the strangle simply trades credit for a larger margin of error.
Is a short strangle a good strategy — is it safe?
A short strangle can have a high probability of profit, which makes it tempting, but it is not safe: the rare loss is undefined and can dwarf many small wins. It needs the highest options-approval level and margin, and a single gap or earnings surprise can blow through a strike overnight. For most retail accounts a defined-risk version — an iron condor or a jade lizard — delivers a similar bet with a loss you can actually survive.
When should you sell a strangle, and when should you not?
Sell one only on a liquid, range-bound underlying when implied volatility is high (so you are selling expensive premium expecting it to fall), in an account with the approval, margin and discipline to manage it. Do not sell into low volatility, do not hold through earnings or a known catalyst, and never size so large that one gap could threaten the account. If you cannot manage it actively, choose a defined-risk structure instead.
Related questions
- What is a jade lizard, a short strangle with the upside capped?
- What is an iron condor, a short strangle with both sides capped?
- How do iron condors compare to selling strangles?
- What is the expected move, for placing the strikes?
Related tools and guides
See what 14 years of them actually returned in the short strangle backtest, run your own numbers in the Short Strangle Calculator, cap the upside with a Jade Lizard, or cap both tails with an Iron Condor. Buying volatility instead? See the long straddle & strangle calculator, and the setup conventions in strategy setups.
Educational explainer only — not financial advice. Examples are illustrative and exclude commissions, early assignment and dividends. Confirm the mechanics and size positions to your own risk tolerance.