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Short Straddle

A short straddle sells a call and a put at the same strike and expiration, collecting the richest premium any two-leg strategy offers. You profit if the stock stays close to the strike — and take undefined risk in both directions for the privilege.

When it makes sense

IV rank is high and you expect it to fall — post-panic, pre-consolidation
You expect the stock to pin near a level through expiration
You have the account size and discipline to manage undefined risk

How it works

Sell the at-the-money call and put in the same expiration. Max profit is the full credit, earned only if the stock closes exactly at the strike. Profit shrinks to zero at the strike ± the credit, and losses grow without limit beyond.

Risk & reward

Maximum profit: the credit. Maximum loss: unlimited above, severe below. This is a professional's tool — most traders cap the risk by converting to an iron butterfly or managing early. High theta works for you; a gap through a breakeven works badly against you.

Worked example

Stock at $150. Sell the 25-day $150 straddle for $9.00 ($900). Stock at $152 at expiration: keep $700 of the credit. Stock at $170: lose $1,100. Breakevens: $141 and $159.

Scan the market for short straddles

OptionClaws ranks every short straddle in the market by return, probability, and liquidity — free for 7 days.