Selling straddle is the exact opposite of buying a straddle. Instead of buying a call and put option at the same strike price, the investor instead sells a call and put option the same strike price.
When selling a put, you profit when the price is above the break even price (strike-premium collected). When selling a call, you profit when the price is below the break even price (strike-premium collected). When selling a straddle therefore, you profit when the price is above the call break even price and below the put break even price.
Price is above the put break even price and below the call break even price: Profit! Maximum profit is at the strike price. Therefore, when selling a straddle you are under the impression that the price will be at the strike price by expiration.
Price is not within the aforementioned range: Loss. Unlike buying a straddle, when selling a straddle there is an unlimited amount of loss.
Ninteen year-old trader, future connoisseur of options.
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