A short straddle is an options trading strategy where a trader simultaneously sells a call option and a put option with the same strike price and expiration date. This strategy is typically used when the trader expects the underlying stock to remain relatively stable and not make significant price movements in either direction.

The primary goal of a short straddle is to profit from the premiums received from selling both options. If the stock price stays close to the strike price until expiration, both options may expire worthless, allowing the trader to keep the entire premium as profit. This makes the strategy attractive in low-volatility market conditions.

However, a short straddle carries substantial risk. If the stock price moves sharply upward, the call option can result in unlimited losses, as there is no cap on how high a stock price can rise. Conversely, if the price drops significantly, the put option can also lead to large losses, though these are limited to the stock reaching zero.

Time decay, or theta, works in favor of the trader in this strategy, as the value of the options decreases over time. Despite its income potential, a short straddle requires careful risk management, proper position sizing, and constant monitoring due to its high-risk nature in volatile markets.

A short straddle is an options strategy in which a trader sells both a call and a put option on the same underlying asset, using the same strike price and expiration date. It is typically used when the trader expects minimal price movement in the market. The trader earns income from the premiums collected from both options. If the asset price remains near the strike price at expiration, both options may expire worthless, allowing the trader to keep the full premium as profit. However, this strategy involves high risk because significant price movements in either direction can result in substantial losses. Since potential losses can be unlimited, short straddles are generally employed by experienced traders who understand risk management and closely track market volatility and price behaviour.