Yesterday a trader came in to the SPX pit with an outlook that involves a (somewhat) range bound market through mid-February of next year. With the S&P 500 around 2070 there was a seller of just over 39,000 SPX Feb 20th 1860 Puts at 9.30 who also sold the same number of SPX Feb 20th 2150 Calls at 11.00 for a net credit of 20.30. We never know the end game or the mindset of the trader in these situations. However, we can always take a look at what the trade will do if held to expiration. In this case the profit or loss for selling the SPX Feb 20th 1860 – 2150 Strangle at 20.30 shows up below.

SPX Payoff


Short strangles are considered a neutral strategy and in this case SPX at 2070 on February expiration date would result in a maximum profit of 20.30. However, note on the diagram above that there is a lot more wiggle room to the downside than to the upside. I believe if this position is still open a few days before expiration the trader behind the trade would be most comfortable with the S&P 500 just above 2000 or midway between the two option strike prices.