Short Straddle Strategy
Learn to collect maximum premium by selling at-the-money puts and calls. The short straddle offers the highest premium potential but requires precise timing and active management.
What is Short Straddle Strategy?
Short Straddle Strategy is a neutral options strategy where you sell an at-the-money put and an at-the-money call with the same strike and expiration. You collect maximum premium and profit if the stock stays near the strike price.
Short straddles collect the highest premium of any options strategy but have the narrowest profit zone and unlimited risk on both sides. Reserved for experienced traders.
TL;DR - Quick Summary
Short Straddle = Sell ATM put + Sell ATM call at same strike. Maximum premium collection. Profit if stock stays near the strike. UNLIMITED RISK on both sides. Narrower profit zone than strangle. Best immediately after earnings or when expecting consolidation. Requires margin and active management.
What is a Short Straddle?
A short straddle involves selling an at-the-money put and call at the same strike price. This is the highest premium collection strategy but has unlimited risk on both sides and the narrowest profit zone.
Key Characteristics
- Win Rate: 50-60% (narrower zone than strangle)
- Max Profit: Premium collected (highest of any strategy)
- Max Loss: UNLIMITED on both sides
- Best For: Post-earnings plays, low expected movement
Risk Warning
Short straddles are among the riskiest options strategies. Any significant move in either direction results in large losses. Only for experienced traders who understand position sizing, Greeks, and have the discipline to cut losses quickly.
Related Options Strategies
Short Strangle
OTM version with wider profit zone but less premium.
Iron Butterfly
Defined-risk version of short straddle with long wings.
Understanding related strategies helps you choose the best approach for your market outlook and risk tolerance. Each strategy has unique characteristics that make it suitable for different market conditions.
Your Learning Path
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