In this strategy the strikes of the options differ. This is also a trade that benefits from decay and decreased volatility regardless of direction. Because the strike prices involved are further apart than a short straddle, there is a lower risk that this trade will cause the investor to face a loss. As with a short straddle, profit is capped to the initial premium while loss is potentially unlimited. The short strangle makes maximum profits between the two strike prices and has two breakeven points. Outside of these breakeven points the trade has unlimited loss potential in the event that the share price continues to increase or decrease, though the downside potential loss is limited by the fact that the share price could only fall to a minimum of zero.
