Short Straddle/Strangle: Selling Volatility (The Strategy of Unlimited Risk)

Strategy Overview and Setup

The Short Straddle (卖出跨式) and Short Strangle (卖出宽跨式) are advanced, net-credit options strategies used to profit when the underlying asset experiences low volatility or remains range-bound.

Goal: To collect premium by betting that the implied volatility (IV) of the asset is overstated and will decline, or that time decay (Theta) will erode the options' value quickly.

**Setup:

1. Short Straddle:** Sell one At-The-Money (ATM) Call and simultaneously sell one ATM Put (same strike, same expiration).

2. Short Strangle: Sell one Out-of-The-Money (OTM) Call and simultaneously sell one OTM Put (different strikes, same expiration).

Profit Profile: Maximum profit is limited to the initial net credit received. This occurs if the underlying asset closes exactly at the strike price (Straddle) or between the two strike prices (Strangle) at expiration, making both options worthless.

**Break-Even Points (BEP):

Lower BEP:** Put Strike Price - Net Premium Received

Upper BEP: Call Strike Price + Net Premium Received