Short Strangle

Description

Selling both an OTM Call and an OTM Put.

Trading Logic

Provides a wider profit zone than a Straddle.

Practical Example

Stock at $100. Sell $110C ($3) and $90P ($3). Total premium: $6.

P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss