Short Straddle
Sell an ATM call and an ATM put at the same strike price and expiration. You collect maximum premium and profit if the stock stays near the strike. This is a high-premium, high-risk strategy.
Payoff Diagram
How to Set Up This Trade
Sell one ATM call and one ATM put at the same strike price and same expiration.
Trade Setup — 2 Legs
When to Use This Strategy
You expect very little stock movement. Implied volatility is high and expected to drop (IV crush). You have a large account and can manage risk actively.
Tips from the Pros
- 1
This is an undefined-risk strategy — always have a stop-loss or adjustment plan.
- 2
Popular before earnings if you expect IV to collapse, but the stock must not move much.
- 3
Consider converting to an iron butterfly by adding protective wings to limit your risk.
Quick Reference
Max Profit
Limited to the total premium received from both options.
Max Loss
Unlimited on the upside (short call) and substantial on the downside (short put, stock can go to zero).
Breakeven
Upper breakeven: strike + total premium. Lower breakeven: strike - total premium.
Best IV Environment
High IV
Time Decay (Theta)
Helps (positive theta)
Risk Level
High RiskLearn More
Our courses cover this strategy with real trade examples and live market analysis.
Browse CoursesRelated Neutral Strategies
Other strategies for a neutral market outlook.
Iron Condor
Sell an out-of-the-money call spread and an out-of-the-money put spread simultaneously. You profit if the stock stays within a range. This is one of the most popular income-generating strategies.
Iron Butterfly
Sell an ATM call and an ATM put at the same strike, then buy an OTM call and OTM put for protection. Similar to an iron condor but with the short strikes at the same price, producing more premium and a narrower profit zone.
Short Strangle
Sell an OTM call and an OTM put at different strike prices. Similar to the short straddle but with a wider profit range and lower premium collected. Still an undefined-risk strategy.