![]() ![]() Short Strangle Profit / (Loss) at ExpirationĪ short strangle profits when the price of the underlying stock trades in a narrow range between the breakeven points. Short 105 Call Profit/(Loss) at Expiration ![]() Profit/Loss diagram and table: short strangle Lower strike price minus total premium:.Higher strike price plus total premium:.There are two potential break-even points: On the downside, potential loss is substantial, because the stock price can fall to zero. Potential loss is unlimited on the upside, because the stock price can rise indefinitely. The maximum profit is earned if the short strangle is held to expiration, the stock price closes at or between the strike prices and both options expire worthless. Profit potential is limited to the total premiums received less commissions. Potential loss is unlimited if the stock price rises and substantial if the stock price falls. A short strangle is established for a net credit (or net receipt) and profits if the underlying stock trades in a narrow range between the break-even points. Both options have the same underlying stock and the same expiration date, but they have different strike prices. A short strangle consists of one short call with a higher strike price and one short put with a lower strike. ![]()
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