⚠️

Short Straddle

Neutral Strategy

Use Zuviz's free options visualizer to build this strategy instantly. Sell an ATM call and ATM put. Maximum premium collected but UNLIMITED risk on both sides. For experienced traders only.

⚡ Key Takeaways

  • Market Outlook: Neutral (low volatility expected)
  • Max Profit: Total premium received
  • Max Loss: Unlimited in both directions
  • Breakeven: Strike ± total premium
  • Best for: Income generation when expecting minimal movement (HIGH RISK)
  • Greeks Impact: Positive Theta (maximum), negative Vega, zero Delta initially

💡 Visualize this strategy in 10 seconds: Open Zuviz →

Market Outlook
Neutral (low volatility)
Max Profit
Total Premium
Max Loss
UNLIMITED
Breakeven
Strike ± Premium

📊 Payoff Diagram

Open in Zuviz →

🏗️ Strategy Structure

Leg Action Type Strike Premium
1 Sell Call $100 (ATM) $4.00
2 Sell Put $100 (ATM) $4.00

Total Credit: $4.00 + $4.00 = $8.00/share ($800/contract)

Breakevens: $92 and $108

🧮 Key Calculations

🎯 When to Use This Strategy

  • Very high IV: Premium is elevated, expecting IV crush
  • Expecting no move: Stock will stay pinned at current price
  • After earnings: When IV has already dropped
  • Large capital: Can handle significant margin requirements

📈 Greeks Impact

Delta (Δ)

Near Zero - You want the stock to stay still.

Theta (Θ)

Positive - Time decay is your best friend here.

Vega (ν)

Negative - You want volatility to decrease (IV Crush).

⚖️ Pros & Cons

Pros

  • High premium collection
  • Profits if stock stays still
  • High theta

Cons

  • Unlimited risk
  • Volatile
  • Assignment risk

📝 Real-World Example

Stock: F at $12. Trade: Sell $12 Call & Put.

Credit: $1.00. Max Profit: $100. Max Loss: Unlimited. Breakeven: $11 / $13.

🔗 Related Strategies

🦋 Iron Butterfly

Defined risk version with protective wings

↕️ Long Straddle

Opposite: profit from big moves

Visualize This Strategy

See the payoff diagram in Zuviz.

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