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Short Straddle Calculator

Short straddle profit or loss equals total credit minus call obligation minus put obligation, times 100 shares times contracts.

Expiration scenarios

Solution

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Educational estimate only, not financial advice. Results exclude commissions, taxes, slippage, dividends, assignment risk, margin, and broker-specific rules. Verify before trading options.

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Short Straddle Formula

Maximum profit is the total credit. Upside risk is unlimited on the short call side.

Worked Examples

Load these examples to compare common short straddle payoff outcomes.

RANGE TRADE

What happens if stock stays in the profit zone?

The stock closes between the short strikes or at the straddle strike.

  • Both options have little or no intrinsic value.
  • The credit is retained.
  • Profit is highest near the center of the position.

Result: the position keeps most or all of its credit.

Before expiration, losses can appear even inside the range if volatility expands.

How It Works

A short straddle sells a call and put at the same strike. It collects premium and profits if the stock stays near the strike through expiration.

Example Problem

Sell a $100 call for $5 and a $100 put for $4.

  1. Add the premiums to get total credit.
  2. Calculate call and put obligations at expiration.
  3. Subtract obligations from the credit.
  4. Compare the stock price with both break-evens.

Short straddles and strangles have unlimited upside risk from the short call.

Key Concepts

The maximum profit is the credit collected. Break-evens sit below the put side and above the call side.

Applications

  • Estimating premium-selling ranges.
  • Comparing straddle and strangle width.
  • Sizing risk before entering short-volatility trades.

Common Mistakes

  • Ignoring unlimited upside risk.
  • Using mid-trade mark prices as expiration payoff.
  • Forgetting the put-side loss can still be large.

Frequently Asked Questions

What does the Short Straddle Calculator calculate?

It calculates expiration profit or loss, break-even levels, maximum profit or loss where they are defined, and payoff chart data from manually entered prices and premiums.

Does this calculator need live option quotes?

No. Enter the stock price, strikes, premiums, and contracts yourself. The calculator models expiration payoff from those inputs.

Does this model early assignment or changing implied volatility?

No. It is an expiration payoff calculator. It does not model commissions, fees, early assignment, exercise decisions, taxes, or mark-to-market pricing before expiration.

Why can payoff before expiration differ from this result?

Before expiration, option prices still include time value and implied volatility. This calculator focuses on intrinsic value at expiration.

Reference:

Options Industry Council strategy education and standard expiration payoff definitions.

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