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Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Strip
Strap
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Short Guts

Risk: unlimited
Reward: limited

General Description
Entering a short guts entails selling lower strike in-the-money calls and selling an equal number of higher strike in-the-money puts (same expiration date). It's similar to a short strangle, but instead of using out-of-the-money options, in-the-money options are used.

(draw a short guts risk diagram here)

The Thinking
You're confident a stock will trade in a tight range and not move much from its current position. To profit you sell both calls and puts - both of which decline in value when the underlying trades sideways (time decay). If you're correct, if the underlying stays relatively close to home (ideally between the two strikes), the calls and puts will declined in value, and you'll be able to buy them back at a lower price.

Example

XYZ is at $52.50. You sell (1) 50 call for $5.00 and sell (1) 55 put for $5.00. The trade is initiated for a net credit of $10.00.

The max profit zone exits between the strikes, but because it would be impossible for both the call and put to expire worthless, the net credit is not your max profitability. Instead it’s much lower. As an example, at $52.5, the 50 call is worth $2.50 ($2.50 profit) and the 55 put is worth $2.50 ($2.50 profit) for a profit of $5.00. This is your max profitability.

The downside breakeven is 10 points (the net credit) below long put strike, and the upside breakeven is 10 points above the long call strike. So as long as the stock closes between $45 and $60 at expiration, you’ll make money. That’s a nice wide range, but in exchange for such a favorable situation, you have virtually unlimited loss potential to the downside and unlimited loss potential to the upside.

The PL chart below graphically shows where this trade will be profitable and at a loss.