Covered Strangle Calculator
Model your covered strangle before you place it. Enter your shares, call strike, and put strike to instantly see max profit, max loss, breakeven, and a full P&L diagram for your covered strangle position.
How to Use This Calculator
Enter your stock position and both option legs and the calculator handles the rest. Results update instantly as you type.
Pull current market data (optional)
Type a ticker like AAPL and click Get Price. The calculator fills in the current stock price, dividend yield, and the risk-free rate from the 13-week T-bill, then loads the option chain so you can pick actual strikes and premiums.
Set up your covered strangle legs
The covered strangle legs are preloaded for you. Pick each strike, expiration, and premium straight from the option chain, or type your own numbers. The calculator works out implied volatility from the premium you enter, and you can still edit it. The stock leg is included automatically.
Calculate and read the results
Click Calculate P&L to see max profit, max loss, breakeven, return on risk, and probability of profit, plus position Greeks: delta, gamma, theta, vega, and rho.
Stress test before you trade
Drag the view-date slider to see your P&L curve on any day before expiration, shift implied volatility up or down 50 points, and scan the price-by-date P&L table to see how the trade behaves across scenarios.
This covered strangle calculator prices each leg with your choice of an American-style binomial model (the default for US equity options) or European Black-Scholes-Merton, and accounts for dividend yield. You can set a per-contract commission, copy a shareable link to your exact setup, download the chart as a PNG, and switch to dark mode.
Understanding the Covered Strangle
Key numbers every covered strangle trader needs to know before entering the position.
A covered strangle layers a short OTM put on top of a covered call. You already own 100 shares and sell an OTM call against them — that is a covered call. The covered strangle adds one more step: selling an OTM put below the current stock price to collect additional premium. The two premiums combined give you more income than a covered call alone and lower your effective cost basis further.
The trade-off is the put obligation. If the stock falls to the put strike at expiration, you are assigned 100 more shares at that price. This means the covered strangle is really a bullish-to-neutral strategy for traders who would be happy to own more shares at a lower price. If you are not comfortable doubling your share position, a standard covered call is a safer choice.
Covered strangles work best on stocks you want to hold long-term, in high implied volatility environments where the premiums on both legs are meaningful. The ideal outcome is the stock trading sideways between the two strikes at expiration — both options expire worthless, you keep both premiums, and your shares are unaffected. You can then repeat the process, systematically reducing your cost basis over time.
Covered Strangle Example Trade
Own 100 shares of XYZ at $100. Sell $105 call for $1.50 and sell $95 put for $1.00. Total premium collected: $2.50.
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Covered strangle — frequently asked questions
A covered strangle is an options strategy where you own 100 shares of stock, sell an OTM call against those shares (like a covered call), and also sell an OTM put below the current stock price. The shares collateralize the short call and cash (or margin) covers the short put. You collect premium from both legs. If the stock stays between the two strikes at expiration, both options expire worthless and you keep the full combined premium while retaining your shares.
Maximum profit occurs when the stock closes at or above the short call strike at expiration. Your shares are called away at the call strike, the put expires worthless, and you keep both premiums. Max profit = (call strike − stock cost basis) × 100 + total premium received. For example, owning shares at $100, selling a $105 call for $1.50, and selling a $95 put for $1.00 gives max profit of ($105 − $100) × 100 + $250 = $750.
If the stock falls below the put strike at expiration, you are assigned and must buy 100 additional shares at the put strike price. This doubles your stock exposure. Your existing 100 shares are also now worth less than your cost basis. The total premium collected from both legs reduces your blended cost basis on the combined 200-share position. This is why covered strangles are best suited for stocks you genuinely want to own more of at lower prices.
A covered call sells only the OTM call against your shares. A covered strangle adds a short OTM put, collecting additional premium and reducing your cost basis further. The covered strangle generates more income but requires more capital to cover potential put assignment and carries more downside risk if the stock falls sharply. If you would not be comfortable buying 100 more shares at the put strike, stick with a covered call.
A covered strangle works best when you are bullish to neutral on a stock you already own, when implied volatility is elevated (making both premiums more attractive), and when you are genuinely willing to add to your position at the put strike. It is a popular strategy among income-focused investors who run systematic covered-call programs and want to collect extra premium on the put side. Avoid it on stocks you are not committed to owning in larger size, since put assignment means doubling your exposure.