Build one short put and one short call spread
Use positive strikes Kp < Kc < Kl: sell the Kp put, sell the Kc call and buy the Kl call. Each leg has q positive whole-number contracts with positive multiplier M and matching underlying, expiration and settlement terms. The example assumes an unadjusted equity contract delivering 100 shares, q = 1 and an illustrative stock price of $100 at entry. Premiums below are hypothetical dollars per share, not available quotes.
- The long call limits the loss of the matched call spread. There is no long put to protect the lower side, unlike an iron condor.
- Verify the actual multiplier and deliverable. An adjusted contract or a different settlement series cannot be treated as an ordinary 100-share contract merely because its strike looks similar.
- Unequal call quantities change the high-price slope. More short calls than long calls can leave unlimited upside loss; the width test below applies only to matching call exposure.
| Leg | Strike | Premium per share | Opening cash flow |
|---|
| Sell 1 put | $95 | Receive $4.20 | +$420 |
| Sell 1 call | $105 | Receive $2.10 | +$210 |
| Buy 1 call | $110 | Pay $1.00 | -$100 |
| Combined | Call width $5 | Credit $5.30 | +$530 before fees |
Derive the complete expiration P&L
Let S be the nonnegative stock price at expiration, p the put premium received, cs the call premium received and cl the call premium paid. Gross credit per share is c = p + cs - cl. Let F be the total dollar costs included in the scenario, C = q × M × c - F the net cash credit, and d = C / (q × M). The net expiration P&L is C - q × M × max(Kp - S, 0) - q × M × max(S - Kc, 0) + q × M × max(S - Kl, 0).
- Maximum net P&L is C, between the two short strikes. If costs exceed the gross credit, even this best result is negative.
- At S = 0, P&L is C - q × M × Kp. The downside loss is max(q × M × Kp - C, 0). For this stock model it is large but finite, because the stock cannot fall below zero.
- The largest loss across all expiration prices is max(0, q × M × Kp - C, q × M × W - C). It is not generally just call width minus credit.
- These expressions assume the package remains economically intact through the stated expiration valuation and F is fixed. If assignment, financing or closing costs differ by scenario, recalculate each cash ledger. They do not price the options before expiration.
| Expiration region | Net P&L | What changes with S |
|---|
| 0 ≤ S < Kp | q × M × (d + S - Kp) | Each $1 decline costs q × M |
| Kp ≤ S ≤ Kc | q × M × d = C | All intrinsic values are zero |
| Kc < S < Kl | q × M × (d - S + Kc) | Each $1 rise costs q × M |
| S ≥ Kl | q × M × (d - W), where W = Kl - Kc | Both call slopes cancel |
Require net credit to cover the entire call width
For every price at or above the short call strike, the smallest expiration P&L is the upper plateau C - q × M × W. Therefore no loss in that region requires C ≥ q × M × W, equivalently c ≥ W + F / (q × M). Strictly positive profit requires > rather than ≥. Compare cash with cash or per-share amounts with per-share amounts.
- The $4.80 counterexample uses the same strikes with premiums $3.70 + $2.10 - $1.00. Keeping the structure while changing its entry credit changes the risk conclusion.
- For two complete sets at $5.30 credit and $12 total fees, C = 2 × 100 × 5.30 - 12 = $1,048. The upper liability is 2 × 100 × 5 = $1,000, leaving $48. If fees do not scale proportionally, recompute them instead of doubling a one-set net result.
- Include applicable commissions, exchange, exercise or assignment charges in F. Actual fill prices already include execution slippage relative to a model; do not subtract it twice. Extra carrying costs can consume a small positive plateau.
| Gross credit c | Net C with q = 1, M = 100, F = $6 | P&L at S ≥ $110 |
|---|
| $5.30 | $524 | +$24: exceeds the $500 liability |
| $5.06 | $500 | $0: equality after fees |
| $5.04 | $498 | -$2: gross credit exceeds width, net credit does not |
| $4.80 | $474 | -$26: an upside loss remains |
Locate the breakevens and check each leg
For an ordinary positive net credit with 0 < d < Kp, the lower breakeven is Kp - d. An upper breakeven exists inside the call spread only when 0 < d < W, at Kc + d. In the main example d = 5.24, so the lower breakeven is $89.76 and there is no upper breakeven. Each row below adds the $524 net credit once to the three intrinsic values.
- For the $4.80 gross-credit counterexample, d = 4.74: breakevens are $90.26 and $109.74. Above $110 the $26 loss stops growing, but it is still a loss.
- If d = W, every S ≥ Kl breaks even. If d > W, the upper plateau is positive. If d = 0, the whole interval from Kp to Kc breaks even; if d < 0, no expiration price is profitable or breaks even.
- The lower root exists in the nonnegative price domain only when 0 ≤ d ≤ Kp. At d = Kp it is zero; d > Kp gives no lower root. Evaluate these edge cases with the piecewise formula rather than reporting a negative stock-price breakeven.
| S | Short 95 put | Short 105 call | Long 110 call | Net P&L |
|---|
| $0 | -$9,500 | $0 | $0 | -$8,976 |
| $80 | -$1,500 | $0 | $0 | -$976 |
| $89.76 | -$524 | $0 | $0 | $0 |
| $95 | $0 | $0 | $0 | +$524 |
| $105 | $0 | $0 | $0 | +$524 |
| $108 | $0 | -$300 | $0 | +$224 |
| $110 | $0 | -$500 | $0 | +$24 |
| $125 | $0 | -$2,000 | +$1,500 | +$24 |
Assignment can replace an option with a stock position
American-style short options can be assigned before expiration. For the standard equity contracts assumed here, a put assignment buys shares and a call assignment delivers shares. The long call does not exercise merely because the short call was assigned. OIC also warns that exercise decisions and expiration exceptions can leave a spread with unexpected stock exposure.
- At S = $80, put assignment produces stock worth $8,000 after paying $9,500. Adding $524 net premium gives the $976 economic loss in the table. The $1,500 intrinsic loss is not a second cash payment on top of the share purchase.
- Check broker exercise cutoffs, notices and final share balances, especially near either call strike. A short stock position remaining after the long call expires has a different risk profile from the original three-leg package.
- Early assignment can require financing, stock borrow or dividend payments. Margin demands and forced liquidation can occur before the modeled expiration. Reserved cash can fund a put assignment but does not remove the loss on the shares.
| Event in the example | Cash and position change | What remains to manage |
|---|
| 95 put assigned | Pay $9,500 and receive 100 shares | Long stock plus the call spread, if both calls remain open |
| 105 call assigned with no stock held | Receive $10,500 and deliver 100 shares | Short 100 shares plus the put and long 110 call, if still open |
| Both calls settle through matched delivery | Sell at $105 and buy at $110: $500 net payment | No net call-related shares after reconciliation; check the put separately |
| At expiration S is between $105 and $110 | Short call may deliver shares; long call is out of the money | A stock short can survive the options expiration |
Separate a planned exit from an expiration outcome
Before expiration, the package value includes time value and changing implied volatility. A positive upper expiration plateau does not guarantee a profitable early close. Buying back the short put and short call while selling the long call closes the original options exposure only when all required quantities fill.
- For a displayed entry estimate, use the put bid plus the short-call bid minus the long-call ask, then deduct costs. Midpoint or theoretical inputs may not be executable together. Missing quotes, stale timestamps and insufficient size require a new estimate.
- Set an intended review or exit rule and the capital available for assignment before entry. A stop or package limit order does not guarantee a fill through a gap or halt.
- A roll closes one trade and opens another. Record the realized result and new credit, strikes, costs and expiration; extending the date does not erase the loss already incurred.
Reproduce the structure in TradingView Options
TradingView documents custom option strategies with editable direction, strike, expiration, size and trade price. Create a custom strategy, remove unwanted positions and add the short 95 put, short 105 call and long 110 call for one available underlying and matching expiration. Use equal quantities and check the contract multiplier.
- Enter 4.20, 2.10 and 1.00 as hypothetical premiums. Inspect expiration results at 80, 95, 108 and 125. Before the $6 fee adjustment, those results are -$970, $530, $230 and $30 for the assumed multiplier.
- Record whether the chart uses points or cash and whether it includes fees. Subtract the $6 only if absent. If the exact strikes or series are unavailable, keep this as a hand-calculated example rather than substituting a different trade without labeling it.
- The chart is a scenario for selected inputs. A historical test also needs dated contract quotes, fills, costs and assignment records. A payoff curve alone supplies neither historical performance nor a tradable package quote.
Keep the three contract inputs and risk condition in Pineify
AI Stocks & Options Picker has an options-chain view by expiration and strike, including call and put bid/ask fields where data is supplied. Inspect availability for the exact three contracts, then confirm the quote timestamp, multiplier and settlement terms. An empty chain or missing quote is missing evidence, not a zero premium.
- Use Trading Journal plan notes to preserve each contract identifier, direction, quantity, premium source, expiration and fee assumption. Write the test C ≥ q × M × W beside the lower breakeven and stock-at-zero loss.
- In review notes, record actual fills, rejected legs, assignment notices, stock positions and closing costs. Recalculate the condition from those fills. The options-chain view and journal notes do not automatically execute or reconcile a jade lizard.
