Covered Strangle Calculator
A covered strangle holds shares, sells a call against them and sells a put on top. You collect two premiums, cap the upside at the call strike, and agree to buy 100 more shares if the stock falls below the put strike.
The arithmetic
The default holds 100 shares at $100, sells the $105 call for $2.20 and sells the $95 put for $2.20 — $440 of combined premium.
- Max profit = (105 − 100 + 4.40) × 100 = $940, at or above $105.
- Breakeven = $95.60 on the existing shares.
- Below $95 you are assigned a second 100 shares, so the position doubles exactly as it is losing.
- Max loss = both share lots going to zero, less premium: $19,060.
The part that catches people out
Read the left side of the chart carefully. Below $95 the slope steepens — that is the short put converting into a second block of shares. Most positions get smaller as they go wrong. This one gets bigger, and it happens automatically, at the worst moment, without a decision from you.
That is not a flaw if it is the plan. Traders who genuinely want 200 shares and are happy to average in at $95 are using the structure exactly as designed. Traders who sized the position at 100 shares and forgot the put is a commitment to another 100 discover their risk doubled while they were losing.
Two premiums for two different obligations
The call premium is paid for capping your upside — a cost you bear only if the stock rises. The put premium is paid for agreeing to buy more — a cost you bear only if it falls. Collecting both feels like double income and is really two separate agreements that happen to settle on the same date. Price them separately: is the $220 call premium worth giving up everything above $105, and is the $220 put premium worth committing $9,500 more capital?
Capital, not just risk
Running this position requires having the cash for the second lot. If it is not there, assignment turns into a margin call. Size the whole structure off the total commitment — $19,500 here — rather than off the $10,000 you have currently deployed.
Where the 100x multiplier comes from
Product specification, not convention: OCC defines a standard equity option as covering 100 shares, premium quoted in points where one point is $100[1] — so a $1.85 premium costs $185, and every payoff here applies that multiplier to the leg structure.
One exception is worth knowing about: adjusted contracts, covered on the options profit calculator.
Calculating it is the easy half
The premiums are easy; the obligation is the part worth recording. The payoff is arithmetic — anyone can run it. What it cannot show is whether you believed the trade when you put it on, or are describing a winner picked out of a month of noise.
That is the gap kappi closes: the position committed before the fact, sealed and timestamped on a log nobody can edit afterwards. A screenshot of this chart proves you can use a calculator; a sealed commit proves you took the trade. $15/month, no free tier.
Sources
Frequently asked questions
What is a covered strangle?
Long shares, a short out-of-the-money call against them, and a short out-of-the-money put. It collects two premiums and commits you to buying more shares if the stock falls below the put strike.
What is the real risk of a covered strangle?
Position size doubling into a decline. Below the put strike you are assigned a second block of shares, so your exposure increases exactly when the trade is going against you.
What is the breakeven on a covered strangle?
On the original shares, your entry price minus the total premium collected. In the default that is $95.60 — but below $95 a second lot arrives at a different cost basis.
How much capital does it really need?
Enough for both lots. In the default that is $19,500 of commitment, not the $10,000 currently deployed.