Short Strangle Strategy

in
Option
Short Strangle Strategy
Expected Stable Prices
Ideal Strategy
Short Put at strike price of lower end of expected stable
price window (OTM)
Short Call at strike price of higher end of expected stable
price window (OTM)
 Short Strangle Strategy

Short Call Option

CMP 300 350 400 450 500 550 600 650 700 750 800 850 900
Call Option Exercised NE NE NE NE NE NE NE NE NE E E E E
Premium c 25 25 25 25 25 25 25 25 25 25 25 25 25
Pay-Off (Short call) 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 -27.5 -77.5 -127.5 -177.5
Short Put Option
CMP 300 350 400 450 500 550 600 650 700 750 800 850 900
Put Option Exercised E E E E NE NE NE NE NE NE NE NE NE
Premium p 25 25 25 25 25 25 25 25 25 25 25 25 25
Pay-Off (Short Put) -177.5 -127.5 -77.5 -27.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5
Margin(both for call and
2.5
Put shorting)
CMP 300 350 400 450 500 550 600 650 700 750 800 850 900
Short
Net Pay-Off -155 -105 -55 -5 45 45 45 45 45 -5 -55 -105 -155
Strangle

Strike Price
 Short Call Option
50

0
NE NE NE NE NE NE NE NE NE E E E E
-50
Pay-Off

300 350 400 450 500 550 600 650 700 750 800 850 900

-100

-150

-200
CMP

Series1 Series2

Short Put Option

50

0
E E E E NE NE NE NE NE NE NE NE NE
-50 300 350 400 450 500 550 600 650 700 750 800 850 900
Pay-Off

-100

-150

-200
CMP

Series1 Series2
Short Strangle Strategy
Short Strangle Strategy
100

50

0
300 350 400 450 500 550 600 650 700 750 800 850 900
Net Pay-Off

-50

-100

-150

-200
CMP
Conclusion
Limited Profit and Unlimited Losses
Margin money needed
Only advanced level option traders should trade
this