Real Example (July 2025)
A short strangle involves selling a call and a put with different strike prices but the same expiration. It's used by traders who expect low volatility and want to profit from time decay.
- Stock: XYZ Corp
- Outlook: Expecting minimal movement
- Setup: Sell 1 XYZ $105 Call @ $2.50; Sell 1 XYZ $95 Put @ $2.00
- Total Credit: $4.50 ($450 per contract)
- Max Gain: $450
- Max Loss: Unlimited (upside) or substantial (downside)
- Breakeven: $109.50 (upside) and $90.50 (downside)