A Short Strangle is used when a stock is expected to remain flat.  Traders will sell both a put and a call for the purpose of collecting premiums. 

 

Strategies		Short Strangle
Component		Sell lower strike price put, sell higher strike price call of the same month
Potential profit		When the stock price is between the upper and lower break-even points Limited to total premium received
Maximum loss		When the stock price is below the lower break-even point, substantial and equals to lower break-even point minus stock price When stock price is above the upper break-even point, unlimited and equals to stock price minus upper break-even point
Time value impact		Positive
Break-even		The lower break-even point equals to lower strike price minus total premium received The upper break-even point equals to higher strike price plus total premium received
		Compared with Short Straddle, Short Strangle has less premium receivable but requires higher market volatility to result in a loss.

Example: