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Covered short strangle calculator
Own stock and sell an OTM call and OTM put for a wider income range.
What is a covered short strangle?
A covered short strangle pairs a covered call with a cash-secured-style short put at a lower strike. Two credits, capped upside, and extra downside if the put is hit.
Legs
- Own the underlying
- Sell an OTM call
- Sell an OTM put
Live example on SPY
Covered Short Strangle
- 800C−112/18 · $2.14
- 711P−112/18 · $6.64
- Long 100 shares at $755.53
With SPY at 755.53, on the Dec 18 expiration (49 days out): own 100 shares at $755.53, sell 1 800 call, and sell 1 711 put. Net credit $878. Max profit $5,324.50; max loss $145,773.50. Breakeven at expiration: Above $746.75 (−1.2%).
Open this covered short strangle in the calculator to move the strikes, change the date and implied volatility, and read profit and loss by price and date.
Questions
- What is a covered short strangle?
- A covered short strangle pairs a covered call with a cash-secured-style short put at a lower strike. Two credits, capped upside, and extra downside if the put is hit.
- When does a covered short strangle make money?
- Own stock and sell an OTM call and OTM put for a wider income range.
- What is the max profit of a covered short strangle?
- Limited: there is a ceiling on what it can make. The calculator gives the figure for your strikes and expiration.
- What is the max loss of a covered short strangle?
- Nearly unlimited: a large move against it can lose many times what it takes in. The calculator gives the figure for your strikes and expiration.
- How do I calculate a covered short strangle's profit and loss?
- Open the covered short strangle in the strategy calculator. It places the legs on a real expiration, and you can drag the strikes, change the date, and read profit and loss by price and date, with max profit, max loss, and the breakevens.