Short strangle strategy

The short strangle is a neutral, premium-selling strategy that involves selling an OTM call and an OTM put at different strikes but the same expiration. Like the short straddle, it collects premium from both sides , but with a wider profit zone because both strikes are OTM rather than ATM.

Bias: Neutral (expects stock to stay within a range) Risk profile: Undefined (large potential loss on either side) Ideal conditions: High IV rank, range-bound stock, no major catalysts imminent

How it's constructed

• Sell an OTM call above the current price
• Sell an OTM put below the current price
• Same expiration, net credit collected

Setup example

SPY at $510, IV rank = 65.

• Sell the $525 call → collect $3.50
• Sell the $495 put → collect $3.80
• Total credit: $7.30 per share ($730 per strangle)

Max profit, max loss, breakevens

Short strangle vs iron condor

The short strangle collects more premium but has undefined risk. The iron condor adds long wings to cap the loss:

For most retail traders, the iron condor is preferable , defined risk is worth the reduced premium. The short strangle is suited to experienced traders with sufficient capital and active risk management.

Managing a short strangle

Close at 25–50% of max profit. Set hard stop-loss levels before entry. Roll tested sides out and away from the stock price when challenged.

Related terms: Short straddle, iron condor, undefined risk, IV rank, theta, rolling

Try it on Stryke: Find high IV rank candidates in the Options Screener.

---