Covered Strangle Payoff Calculator
A covered strangle adds a short out-of-the-money put to a covered call: you own the stock, sell a call above and a put below, and collect both premiums. It is a mildly bullish, income strategy for those willing to buy more shares on a pullback. This calculator shows maximum profit, the profit if called away, the downside breakeven and the profit or loss at any expiration price.
Covered strangle payoff formula
Total premium = call premium + put premium (per share)
Stock P/L = (price - purchase price) * shares
Short call payoff = -max(0, price - call strike) * shares
Short put payoff = -max(0, put strike - price) * shares
Premium income = total premium * shares
Total P/L = Stock P/L + Short call + Short put + Premium income
Max profit = (call strike - purchase price + total premium) * shares
Downside breakeven (approx, equal share counts) = (purchase price + put strike - total premium) / 2
The downside breakeven assumes you end up holding two lots below the put strike (the original shares plus the assigned shares); it is the average price at which the combined long position breaks even net of premium.
Worked example
Buy at $100, short call strike $110 for $3, short put strike $90 for $2, 100 shares. Total premium = $5. If the stock closes at $105: stock P/L = $500; both options expire worthless; premium income = $500. Total P/L = $1,000.00. Maximum profit (called away at or above 110) = (110 - 100 + 5) * 100 = $1,500.00. Downside breakeven = (100 + 90 - 5) / 2 = $92.50. Total premium collected = $500.00.
Covered strangle: frequently asked questions
What is a covered strangle?
A covered strangle holds long stock while selling an out-of-the-money call and an out-of-the-money put on the same underlying. You collect two premiums. The short call caps upside; the short put obliges you to buy more shares if the price falls below the put strike. It suits a mildly bullish, range-bound view and is willing to add to the position on a dip.
What is the maximum profit?
Maximum profit is reached at or above the call strike: (call strike - purchase price + total premium) * shares. Above the call strike your stock is called away, so further gains do not add. The two premiums boost the result versus a plain covered call.
What is the risk below the put strike?
Below the put strike you face losses on both the long stock and the short put, because you must buy additional shares at the put strike. The downside breakeven is lower than a covered call's thanks to the extra premium, but the loss accelerates once the put goes in the money.
Sources and method
- U.S. Securities and Exchange Commission investor education on options: Investor.gov: Options.
- Options Clearing Corporation: theocc.com.
- Payoff is the standard sum of stock, short call and short put expiration values; no proprietary data is used.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.