How to use the straddle and strangle calculator
Both strategies hold a put and a call on the same underlying with the same expiry. Buying them is a bet that the price will move a lot in either direction; selling them is a bet that it will stay put.
- Choose long or short, then straddle or strangle. A straddle uses one strike for both options; a strangle uses a lower put strike and a higher call strike.
- Enter the current price and the number of contracts. Each contract is one put plus one call, each on 100 shares.
- Enter the strike or strikes and the two premiums per share, as quoted.
- Optionally, add a volatility figure and the days to expiry. This does not change the payoff; it adds a lognormal estimate of how far the price is likely to move, so you can compare it with the move the position needs.
The chart shows the V-shaped payoff at expiry with both break-evens. The table gives the result for moves from 25% down to 25% up.
The formulas
Upper break-even = Call strike + Total premium
Lower break-even = Put strike − Total premium
Long: maximum loss = Total premium × 100 × Contracts
Short: maximum profit = Total premium × 100 × ContractsFor a straddle, the put strike and the call strike are the same. Move needed = distance from the current price to each break-even, as a percentage of the price.
The optional expected move uses the standard lognormal approximation with no drift:
Average move ≈ 0.8 × one-standard-deviation move
P(price ends above B) = N[(ln(S ÷ B) − σ²t ÷ 2) ÷ (σ√t)]S is the current price, σ the annual volatility you enter, D the days to expiry, t = D ÷ 365 and N the standard normal distribution. The factor 0.8 is √(2/π). These are model estimates, not forecasts.
A worked example
A stock trades at $100. You buy the $100 put for $3.30 and the $100 call for $3.60, a long straddle that costs $690.00 for one contract.
The break-evens are $93.10 and $106.90. The stock has to move 6.90% down or 6.90% up by expiry before the trade makes money. If it closes at exactly $100, you lose the full premium.
With 28% volatility and 30 days to expiry, the one-standard-deviation move is about $8.03, but the average move is only $6.40, less than the $6.90 the straddle needs. On that model, the chance of finishing beyond a break-even is 38.9%.
Selling the same straddle reverses everything: you collect $690.00, keep it all only if the stock closes at the strike, and profit anywhere between the break-evens, which the model puts at 61.1%. The loss beyond a break-even has no limit on the upside.
Straddle or strangle: cost against distance
| Long straddle ($100) | Long strangle ($95 / $105) | |
|---|---|---|
| Cost for one contract | $690.00 | $295.00 |
| Break-evens | $93.10 and $106.90 | $92.05 and $107.95 |
| Move needed | 6.90% down or 6.90% up | 7.95% down or 7.95% up |
| Model chance of a profit | 38.9% | 32.1% |
The strangle premiums here are illustrative. The strangle is cheaper because both options start out of the money, but the price has to travel further before it pays, and the loss is total anywhere between $95 and $105, not only at one price. A seller faces the mirror image: a short strangle collects less ($295.00) but has a wider zone where it keeps the premium.
Break-even move against expected move
The most useful comparison on this page is the move the position needs against the move the market is likely to make. A widely used approximation is that an at-the-money straddle costs about 0.8 times the one-standard-deviation move, which is the same as the average expected move. So if you enter the options’ own implied volatility, the two figures will usually be close: the market has priced the straddle around the move it expects.
The comparison becomes informative when you enter your own volatility estimate. If you expect 40% volatility instead of 28%, the average move becomes $9.15, more than the $6.90 premium, and the model chance of a profit rises to 54.7%. A long straddle is a bet that the stock will move more than the options imply; a short straddle is a bet that it will move less.
Time works against the buyer. With 60 days instead of 30 days to expiry, the same premium would face an average move of $9.06, but longer options cost more, so check real quotes for the expiry you want before comparing.
Common mistakes
- Buying before earnings without checking the price. Implied volatility usually rises ahead of earnings and falls straight after, so a straddle can lose money even when the stock moves, if it moves less than the options priced in.
- Treating the one-standard-deviation move as the target. The average move is smaller, about 0.8 times as large, and that is the fairer comparison with the premium.
- Ignoring the downside cap. The upside of a long straddle is unlimited, but the downside profit is limited because the price cannot fall below zero.
- Selling without a plan for a gap. A short straddle’s risk is concentrated in rare, large moves that do not show up in a calm month.
What this calculator does not include
The payoff is calculated at expiry from the premiums you enter. Before expiry, the position’s value also depends on time decay and changes in implied volatility, which the option Greeks calculator shows. Commissions, the bid-ask spread on two legs, early assignment of American-style options and dividends are not included. The probability and expected-move figures assume lognormal prices with no drift and a volatility that stays constant; real prices jump, and their tails are fatter than the model allows.