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.
Enter your stock position
Enter the number of shares owned and your cost basis per share. The covered strangle requires at least 100 shares. Your shares collateralize the short call and reduce the net risk of the position.
Enter the short call
Enter the OTM call strike and premium received. This is sold against your existing shares. If the stock closes above this strike at expiration, your shares are called away at that price.
Enter the short put
Enter the OTM put strike and premium received. If the stock falls below this strike at expiration, you are obligated to buy 100 more shares at the put strike. Make sure you have the capital set aside.
Review your results
The calculator shows your combined premium collected, max profit if called away, effective cost basis on your shares, downside breakeven, and a full P&L diagram at expiration.
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.