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All-StarsNeutral (expect low volatility)
Short Straddle
Overview
Selling both a call and a put at the same strike. Maximum profit if the stock expires exactly at the strike price. You collect double premium but face risk in both directions. One of the highest-risk strategies.
Max Profit
Total premium received from both options
Max Loss
Unlimited on upside, substantial on downside
Breakeven
Strike ± Total premium received
Structure
Short 1 ATM Call + Short 1 ATM Put (same strike, same expiry)
Risk Profile
Limited profit (total premium). Unlimited risk to upside, substantial to downside.
When to Use
When you expect very low volatility and the stock to remain near current price. When IV is extremely high. Requires significant margin and active management.